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Would Vapor Corp. (VPCO) shares be a good play for the e-cigarette market?
Posted on 10/16/13 at 12:39 pm
Posted on 10/16/13 at 12:39 pm
It might just be a passing fad, but it seems as though the electronic cigarette market might be about to take off, especially given all these celebrities like DiCaprio that have been seen smoking them recently.
Despite an early patent in 1963 by the American Herbert Gilbert, the original manufacturer of this product seems to be Ruyan (formerly known as Golden Dragon Holdings, and listed as stock 329 on the Hong Kong Stock Exchange as Dragonite Int'l Ltd., which is incorporated in the Cayman Islands), which has their financial reports going back to 2005 listed here. In 2012 they report revenues of only 20.33 million HKD (or about $2.62 million).
The other big Chinese manufacturer seems to be Shenzhen Eson Technologies, a private company that Alibaba lists ( LINK) as having around $ 5-10 million in total revenue.
Other Chinese manufacturers (like Cixi E-Cig, which was one of the 5 companies named in a recent FDA warning from last month) can be seen here.
Interestingly, Big Tobacco is now moving in to get a slice of the pie too: " Big Tobacco Companies Make Bets On Electronic Cigarettes."
Altria Group (formerly Philip Morris; see also the spunoff PMI; maker of Marlboros, Virginia Slims, Skoal, etc.) has jumped into the market with MarkTen.
RJR (maker of Camel, Kool, Winston, Salem, Lucky Strike, etc.) is now into the market with VUSE.
Lorillard (maker of Newport, Maverick, etc.) is now into the market after acquiring Blue Ecig.
British American Tobacco is now into the market with Vype.
Which brings me to the main issue I'm trying to think about--will the niche distributors and retailers of e-cigarettes still be able to do well with their e-commerce niches, or will they get knocked asunder by the big boys?
There's a pretty good list of the e-commerce players that have popped up in recent years here (the article is from June 2013, but they were part of a larger proprietary report, "Research and Markets: US Electronic Cigarettes Market 2011-2015," to which I don't currently have access).
The companies listed are as follows:
Of these, Vapor Corp ( VPCO) seems to be the only one that is publicly traded. There are only a couple of dinky little equity research reports covering it at the moment, and Yahoo lists it as having a market cap of around $50 million and annual sales of around $21 million for 2012, up from around $16 million in 2011, and around $11 million in 2010. (You can see their annual reports here.)
Is there any good way to judge the likelihood that little companies like Vapor Corp. can continue to experience healthy growth in their business despite competition from Big Tobacco?
Despite an early patent in 1963 by the American Herbert Gilbert, the original manufacturer of this product seems to be Ruyan (formerly known as Golden Dragon Holdings, and listed as stock 329 on the Hong Kong Stock Exchange as Dragonite Int'l Ltd., which is incorporated in the Cayman Islands), which has their financial reports going back to 2005 listed here. In 2012 they report revenues of only 20.33 million HKD (or about $2.62 million).
The other big Chinese manufacturer seems to be Shenzhen Eson Technologies, a private company that Alibaba lists ( LINK) as having around $ 5-10 million in total revenue.
Other Chinese manufacturers (like Cixi E-Cig, which was one of the 5 companies named in a recent FDA warning from last month) can be seen here.
Interestingly, Big Tobacco is now moving in to get a slice of the pie too: " Big Tobacco Companies Make Bets On Electronic Cigarettes."
Altria Group (formerly Philip Morris; see also the spunoff PMI; maker of Marlboros, Virginia Slims, Skoal, etc.) has jumped into the market with MarkTen.
RJR (maker of Camel, Kool, Winston, Salem, Lucky Strike, etc.) is now into the market with VUSE.
Lorillard (maker of Newport, Maverick, etc.) is now into the market after acquiring Blue Ecig.
British American Tobacco is now into the market with Vype.
Which brings me to the main issue I'm trying to think about--will the niche distributors and retailers of e-cigarettes still be able to do well with their e-commerce niches, or will they get knocked asunder by the big boys?
There's a pretty good list of the e-commerce players that have popped up in recent years here (the article is from June 2013, but they were part of a larger proprietary report, "Research and Markets: US Electronic Cigarettes Market 2011-2015," to which I don't currently have access).
The companies listed are as follows:
quote:
- Blu Cigs (BLEC LLC)
- CB Distributors Inc
- Green Smoke, Inc
- Intellicig USA LLC,
- Johnson Creek Enterprises
- Jocor Enterprises LLC
- Madvapes LLC
- Nicotek LLC
- Provape Inc,
- PremiumEstore LLC
- Smoker Friendly International, LLC
- Sottera, Inc (NJOY)
- Spark Industries, LLC
- South Beach Smoke Inc
- Totally Wicked E-Liquid USA Inc, (TWEL)
- The Halo Company
- The Safe Cig LLC
- VMR Products
- Vapor Corp
- VAPOR 4 LIFE, INC.
Of these, Vapor Corp ( VPCO) seems to be the only one that is publicly traded. There are only a couple of dinky little equity research reports covering it at the moment, and Yahoo lists it as having a market cap of around $50 million and annual sales of around $21 million for 2012, up from around $16 million in 2011, and around $11 million in 2010. (You can see their annual reports here.)
Is there any good way to judge the likelihood that little companies like Vapor Corp. can continue to experience healthy growth in their business despite competition from Big Tobacco?
5
Posted on 10/16/13 at 5:12 pm to Doc Fenton
MO is the one I trust the most to take over that market........
Posted on 10/17/13 at 11:03 am to PropofoLSU
quote:
MO is the one I trust the most to take over that market........
I agree.
Posted on 10/17/13 at 11:58 am to Doc Fenton
Vapor Corp just SOUNDS like it's going to be that company that won't succeed. 
I know lifelong smokers that have completely made the switch. Some, for over a year now. I don't know whether the traditional e-cig will be here 20 years from now, but in some form, I'd feel confident.
Maybe Vapor Corp can get's bought out eventually?
quote:
It might just be a passing fad
I know lifelong smokers that have completely made the switch. Some, for over a year now. I don't know whether the traditional e-cig will be here 20 years from now, but in some form, I'd feel confident.
Maybe Vapor Corp can get's bought out eventually?
Posted on 10/17/13 at 1:23 pm to Doc Fenton
quote:
Vapor Corp ( VPCO)
i have been tracking this for a while
just too risky
Fluctuating like crazy between 0.74 and 1:10$
Posted on 10/17/13 at 1:31 pm to Northwestern tiger
quote:
Fluctuating like crazy between 0.74 and 1:10$
Doesn't sound risky to me - buy when it drops below $0.80 - sell when it is above $1.00 - rinse, repeat.
Posted on 10/17/13 at 11:27 pm to Ace Midnight
I bought at $0.868 today.
Posted on 10/18/13 at 3:45 am to Cmlsu5618
quote:
Maybe Vapor Corp can get's bought out eventually?
That's what I'm thinking.
I'd say that most of the decent little e-commerce retail companies will likely be able to keep growing for at least a little while, and the Big Tobacco guys will likely acquire them at a premium.
Given that VPCO is the only one that's actually publicly listed right now, I'd say that they are way ahead of the pack and likely to get bought for a nice price. So investing in VPCO would be like merger arbitrage.
Also, in addition to...
Altria (MO) --> MarkTen
Philip Morris Int'l (PMI) --> [NOT ENTERED YET]
R.J. Reynolds Tobacco (RJR) --> VUSE
Lorillard (LO) --> Blue Ecig
British American Tobacco (BAT) --> Vype
... I also just found out about the following:
Imperial Tobacco (IMT) has already agreed to acquire Dragonite's e-cigarette business. That's the original Ruyan Holdings people who manufactured the stuff from the very beginning.
I'm not sure what Swedish Match AB or anybody else is doing yet.
Posted on 10/18/13 at 10:31 am to Doc Fenton
what brand of e-cig does vapor corp make?
Posted on 10/18/13 at 10:40 am to Alabama Slim
quote:
Committed to consumer-driven product innovation, Vapor’s leading brands include Krave®, Fifty-One®, Green Puffer®, Americig®, Vapor-X® and its popular as seen on TV brands, EZ Smoker® and Alternacig®, all of which are registered trademarks of Vapor Corp. LINK
Posted on 10/18/13 at 11:07 am to Doc Fenton
Good thread, I have been looking into this market as well. VPCO was an initial idea, but if big tobacco is getting in the game it might be of interest to go there as well...
Posted on 10/21/13 at 7:19 pm to 19thHole
Sold at 0.94 today.
Posted on 10/23/13 at 9:09 am to LSUtoOmaha
quote:
Sold at 0.94 today
you dodged a bullet
Will most likely lose 40% of its value by the end of the day
Good buy below 0.60$ though
Posted on 10/24/13 at 3:11 am to Northwestern tiger
quote:
Will most likely lose 40% of its value by the end of the day
Jeeez, you weren't lying...
What was all that about?
Posted on 10/24/13 at 3:23 am to Doc Fenton
I've been looking at some additional stuff on electronic cigarette market potential.
Trefis did some modeling (on August 30, 2013) indicating that Altria (MO) could derive about $5 billion in present value from its e-cig business with Nu Mark and the MarkTen brand: LINK.
Also, Imperial Tobacco's deal with Dragonite is still pending, and Lorillard's deal with Skycig is too recent, so I think the only benchmark we have in terms of reliable publicly reported financial numbers from a Big Tobacco company would relate to LO's acquisition of Blue Ecig in April 2012.
Apparently Blue Ecig controls about 40% of the market, and produced $61 million in net sales for 2012, and according to the most recent 10-Q SEC filing for 2013-3Q, e-cigs produced $63 million in net sales for the 3Q, and $177 million in net sales for the first 9 months of 2013.
By the way, I think a similar market share number (maybe 30%) was bandied about for Skycig before LO's acquisition of them, but that was for the U.K. market.
Also of interest, I see now where there are a few other small e-cig companies that are traded, like HPNN, SFIO, & ECIG: LINK.
Trefis did some modeling (on August 30, 2013) indicating that Altria (MO) could derive about $5 billion in present value from its e-cig business with Nu Mark and the MarkTen brand: LINK.
Also, Imperial Tobacco's deal with Dragonite is still pending, and Lorillard's deal with Skycig is too recent, so I think the only benchmark we have in terms of reliable publicly reported financial numbers from a Big Tobacco company would relate to LO's acquisition of Blue Ecig in April 2012.
Apparently Blue Ecig controls about 40% of the market, and produced $61 million in net sales for 2012, and according to the most recent 10-Q SEC filing for 2013-3Q, e-cigs produced $63 million in net sales for the 3Q, and $177 million in net sales for the first 9 months of 2013.
By the way, I think a similar market share number (maybe 30%) was bandied about for Skycig before LO's acquisition of them, but that was for the U.K. market.
Also of interest, I see now where there are a few other small e-cig companies that are traded, like HPNN, SFIO, & ECIG: LINK.
Posted on 10/24/13 at 3:27 am to Doc Fenton
I guess the problem is, if VPCO only controls <10% of the market, and other Big Tobacco firms like Altria, Philip Morris, R.J. Reynolds, & British American, are content to develop all their stuff in house, how valuable is VPCO's wide portfolio of brands going to be?
Will there be enough customer loyalty and/or expertise in designing & marketing new electronic cigarette styles to precipitate a takeover offer?
I think there will be, but I'm not sure if VPCO will command the same kind of multiples as Blue Ecig, Skycig, and Dragonite did.
EDIT: I think LO might have over half the whole market right now, and VPCO only had $19 million in net sales for the first 9 months of 2013.
I'm not sure what Blue Ecig's sales were prior to the April 2012 acquisition, but they were bought for $135 million and produced $61 million in sales for the remaining 8 months of 2012.
Sure they produce about $60 million in sales per quarter now, but I'm guessing that they were closer to doing about $10-15 million per quarter when they were acquired by LO, meaning that VPCO's sales of about $6 million per quarter would likely generate a company valuation of about $50-60 million.
They are trading at a market cap of about $57.05 million now according to Yahoo, but I guess that's in the rough ballpark of where it should be assuming that the regulatory and market situation is similar now to what it was in April 2012.
I suppose you could argue that the market has shown a whole lot more promise since then, and also that a regulatory closing of the market is looking more and more improbable at this point, regardless of whether online sales are restricted to some degree and a few excise taxes piled on here or there.
Will there be enough customer loyalty and/or expertise in designing & marketing new electronic cigarette styles to precipitate a takeover offer?
I think there will be, but I'm not sure if VPCO will command the same kind of multiples as Blue Ecig, Skycig, and Dragonite did.
EDIT: I think LO might have over half the whole market right now, and VPCO only had $19 million in net sales for the first 9 months of 2013.
I'm not sure what Blue Ecig's sales were prior to the April 2012 acquisition, but they were bought for $135 million and produced $61 million in sales for the remaining 8 months of 2012.
Sure they produce about $60 million in sales per quarter now, but I'm guessing that they were closer to doing about $10-15 million per quarter when they were acquired by LO, meaning that VPCO's sales of about $6 million per quarter would likely generate a company valuation of about $50-60 million.
They are trading at a market cap of about $57.05 million now according to Yahoo, but I guess that's in the rough ballpark of where it should be assuming that the regulatory and market situation is similar now to what it was in April 2012.
I suppose you could argue that the market has shown a whole lot more promise since then, and also that a regulatory closing of the market is looking more and more improbable at this point, regardless of whether online sales are restricted to some degree and a few excise taxes piled on here or there.
This post was edited on 10/24/13 at 4:09 am
Posted on 10/24/13 at 2:31 pm to Doc Fenton
$6 million a quarter on puts a valuation of 50-60 million? I know there are plenty of factors here, but I thought a good ballpark figure was more like 5 times annual revenue.
Posted on 10/26/13 at 6:58 pm to LSUtoOmaha
quote:
5 times annual revenue
Maybe you mean net income or EBITDA?
"In general, smaller companies typically trade for between 3x to 5x normalized EBITDA." LINK
I think most e-cigarette companies are still taking losses right now, as 2013 is really the exploding growth phase of the new product, where year-over-year growth will be around 100% for many players. So it's very hard to say what $25 million in annual sales in 2013 will get you.
Posted on 10/26/13 at 8:46 pm to Doc Fenton
That makes more sense. Thanks
Posted on 11/19/13 at 1:39 pm to Doc Fenton
Damn its up like 36% in a week
Wish i bought at 86 cents
Wish i bought at 86 cents
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