Friday, 20 December 2013

Grande West Transportation – "BUS"ting Out Of The Starting Blocks

BUS:TSX-V


We couldn’t resist the temptation for the play on words as Vancouver based speciality bus manufacturer Grande West Transportation began trading this morning on the TSX Venture Exchange under the perfect symbol for the company; “BUS”.

In advance of discussing what has happened over the past five years, as well as an important announcement on a key appointment that was also announced this morning, a brief history of The Howard Group’s involvement with Grande West is in order.

We were introduced to the company, and specifically CEO Will Trainer and CFO John Sutherland, in the spring of this year, through a relationship at MacQuarie Capital (now Richardson GMP). 

After a hard look and many questions as to how an upstart company in the highly competitive bus manufacturing sector was going to make a name for itself and money for investors, The Insight Limited partnership II, which is associated with the Howard Group, invested in the pre-public seed round. By way of disclosure, LP II and a principal of The Howard Group also invested in the Initial Public Offering to hold 320,000 shares.

In every situation, we first look at the people behind a company. It was the business success, talent, public company experience and level of investment and commitment that convinced us that Grande West had a great deal of potential.

In mid-summer, we met with the Board of Directors in Vancouver and conducted a site tour with management at the perfect time, as officials with B.C. Transit were conducting inspections of fifteen “Vicinity” buses that had just been delivered with a value of $3.8 million. It was a particularly gratifying time for the founders of Grande West as after five years of engineering and design, thousands of kilometers of road testing, including ferrying people during the Vancouver Winter Olympics, winning necessary government certifications and investing several million dollars of their own money, their first babies came into the world.

Subsequent to the B.C. Transit delivery, Grande West secured orders for 13 buses between Quebec and Maritime transit authorities.

The Vicinity was designed in conjunction with B.C. Transit, which had a wish list for a multi-purpose urban bus that employed cleaner technologies, longevity, comfort, lower capital and operating costs, and many more features too long to list. The Vicinity is 27.5 feet long. 

Ask yourself, how many times have you seen the traditional 40 foot bus in off peak hours in urban areas with just a few people on board? 

To learn more about Grande West and the Vicinity, click here to view the company’s presentation or click here to access CEO Will Trainer’s pre-IPO presentation at The Howard Group’s Opportunity Knocks Conference in early November in Toronto. There is also a two-minute video clip of the Vicinity in action that was produced by B.C. Transit TV...click here.

Speaking of the IPO, The Howard Group began working with Grande West, following the site visit, on plans for its go public and financing strategy. Our job was to assist the company, not only with the planning and materials preparation to support the financing effort, but also to introduce management to our relationships that would be beneficial to the financing.

Now that Grande West is publicly trading, we will be working with management to further develop the business story and expand the company’s following and relationships within the investment and retail investor communities.

In short, the management team, what had been accomplished, the business plan looking into the future, and the North American opportunity were embraced by key investment firms, institutional managers and individual investors. The IPO was initially set at $3 to $4 million and capped at $5.3 million (gross). Demand was such that the amount raised could have been much higher.

Based on the $0.50 per share (no warrant) pricing, the company’s post money valuation was slightly under $18 million with 35.84 million shares issued at the opening of trading.

Another important item that attracted us to Grande West was the thought that went into the design, parts, and assembly of the Vicinity. It is Canadian engineered and designed with its major components sourced from top North American manufacturers and then assembled in China to reap the cost savings associated with that initiative.

Grande West has a strong relationship with Yaxing Motor Coach, a Shanghai listed large scale bus manufacturer that employs robotics and laser guided assembly lines in an ultra modern facility.

Another extremely attractive element of the business model is that the payment process almost totally minimizes the requirement to carry inventory or use capital resources to fund manufacturing.

On another high note, and to complement the ringing of the bell this morning to open trading at the TSX, the company also made an appointment announcement in “Grande” style. The company has attracted Jean-Marc Landry as Vice President, Business Development.

Mr. Landry was Vice-President of Sales at Nova Bus, a Division of Volvo, for more than eight years and also Vice-President, Sales and Marketing – Americas for San Diego based Cubic Transportation Systems. Both were companies generating sales of hundreds of millions of dollars.   To view the news release, please click here.

It has been a great start for Grande West and now the first part of the dream has been realized. We are very much looking forward to working with management to make the next part of the journey a rewarding trip on the “BUS”.   

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Shares Outstanding: 35,840,000
Shares Fully Diluted: 39,972,000