RE: Great News..ZPP to acquire $315 million busineThis proposed acquisition from its main shareholder will provide ZPP with a superb growth premium , as well as a strong earnings profile.
The acquisition generated $315 million in sales over the past year and earned $15.8 million.
This performance was achieved during tough economic times in China, and as China's growth has now retuirned to normal, future performance should exceed thos levels.
Note the references to 20 to 30 % growth over the next 1-2 years.
The China market for gas and electric motorcycles has tremendous growth opportunity.
In the next few years, ZPP expects the trend to be towards higher quality and better performace as Chinese consumers' needs and expectations evolve and demand superior products with willingness to pay a premium. In addition, the Chinese government to will promulgate and enforce stricter safety and emission regulations, which should eliminate a large number of manufacturers who will be unable to comply with these respective regulations
These market conditions will require motorcycle companies to invest in new technology and manufacturing facilities. ZPP believes this will lead to a consolidation in the industry, in which only the larger players will survive and prosper.
Further , the consolidation of the gas and electric motorcycle businesses of ZPP and ZIG is a first step in scaling up and realizing operational synergies.
Annual sales, assuming normal economic conditions can be expected to grow to about $500 million over the next year or so.
For these reasons , including the additional dilution , ZPP should see annual earnings in the $0.20 to $0.30 range in 2010 and beyond , if they close on this acquisition.