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In a move that will probably surprise many observers, Sugma has done a friendly takeover of E.N.T.E.R.T.A.I.N. With the very solid increase in E.N.T.E.R.T.A.I.N.'s SHV (from $13.24 to $18.30), Sugma has recouped much of the premium it had to pay in order to do the takeover. Clearly this is a move that they hope will cement their position on the leaderboard (having topped the board last year).  So what do we see overall. Well there has been some movement on the board.


Now Sigma (not Sugma) may be concerned about dropping down two places, but let's look at the change in SHV of each firm.

IndustryFirmIncrease in SHV
European UnionPedal8500%
ChinaSigma121%
European UnionRackk City Bikes48%
ChinaE.N.T.E.R.T.A.I.N38%
European UnionPeakPerformanceBros30%
ChinaSugma29%
European UnionJack It Up28%
European UnionPsiclePath25%
ChinaWheelin N Dealin-4%
European UnionMunchy Bikes-23%
ChinaRHO Inc.-36%
ChinaWheelie Cool Bikes-73%

In this regard, PedalSigma, and Rackk City Bikes should be feeling good about the difference they've made to their SHV. Anyway, more about SHV when we get to the leaderboard later on in this report.

IndustryFirmChangeInPost
European UnionRackk City BikesUp 1 place
ChinaE.N.T.E.R.T.A.I.NUp 1 place
ChinaWheelie Cool BikesUp 1 place
ChinaSugmaNo movement
European UnionPsiclePathNo movement
European UnionPeakPerformanceBrosNo movement
European UnionJack It UpNo movement
ChinaWheelin N DealinNo movement
European UnionMunchy BikesNo movement
ChinaRHO Inc.No movement
ChinaSigmaDown 2 places
European UnionPedalDown 1 place

Revenue is always good place to start. In the EU it certainly looks like the growth in revenue is tapering off. That probably means that the markets aren't growing as much as they where, so competition for customers is probably going to get fierce. It won't be the case that firms can grow market share by 'winning' uncommitted customers. Instead, they are going to have to take customers away from their competitors.

No doubt China will also begin to top out in a similar way.

Nevertheless, both China and the EU are producing a similar level of profit overall (with China being more profitable in absolute terms and looking even better if one considers profit as percentage of sales).

At the level of individual firms, there is still quite a spread of profitability.

IndustryFirmProfitRevenueMargin
ChinaSigma$12,986,906$56,777,30123%
ChinaSugma$11,818,819$94,572,72512%
European UnionPeakPerformanceBros$9,902,611$84,263,23712%
European UnionRackk City Bikes$8,346,108$81,769,42410%
European UnionJack It Up$6,434,443$57,978,84811%
ChinaE.N.T.E.R.T.A.I.N$4,532,311$51,446,8949%
European UnionPsiclePath$2,634,866$52,739,2835%
ChinaRHO Inc.$2,315,730$45,356,5205%
ChinaWheelin N Dealin$2,046,567$45,584,4814%
European UnionMunchy Bikes$992,044$32,076,3843%
European UnionPedal-$1,671,352$20,819,838-8%
ChinaWheelie Cool Bikes-$3,985,044$12,114,653-33%

It's nice to see one firm (Sigma) over the 20% mark, with Sugma, PeakPerformanceBros, Rackk CIty Bikes, and Jack It Up all doing 10% or more. All the other firms will be generating less in profit than the interest rate at the bank.

Increasingly operational excellence is going to matter as customers (and revenue) become harder to acquire. So, it good to see that China isn't overspending (so much) on quality. Chine does have a rather short cycle time. I wonder if it is too short.

Overall, making bikes in China remains an expensive exercise compared to the EU.

That said, a big shout out to Pedal and RHO Inc; they are the lowest cost producers by far (and just a dollar or two different from one another).

At nearly three times the COGM per SCU of Pedal or RHO Inc, it costs Wheelie Cool Bikes over $1,300 to produce one SCU. The quality of the bikes they produce is 96%. Wow.


The other area that contributes to costs is, of course, ones capacity. Whilst the EU has been selling capacity it still has over 20% idle time. I wonder if anyone is brave enough to calculate the cost of all that idle time and post here.

Not only is the EU a big spender on capacity, it is also a big spender on advertising. Considering the revenue that the two regions generate, is the $15m extra spending (by the EU) worth it?

Both regions are spending 20% (or more) of their revenue on advertising. Hmmm.

But the good news (is it really good news) is that the consumer continues to grow. What will the regions do about that.

And so to the leaderboard. 

FirmSHVProfitRevenueCapacitySharesEPSCapitalizationTotalSHVEVACashOwner
Sugma$75.39$11,818,819$94,572,72582,2142,000,000$5.91$134,838,110$150,774,452$12,778,106$19,898,868
PsiclePath$46.58$2,634,866$52,739,28371,3662,000,000$1.32$82,085,890$93,169,490$2,714,185-$1,308,456
PeakPerformanceBros$37.74$9,902,611$84,263,23777,4862,000,000$4.95$67,174,436$75,474,436$7,966,934$24,945,126Psicle Path
Jack It Up$35.18$6,434,443$57,978,84838,8072,000,000$3.22$61,407,144$70,358,144$4,934,142$22,692,214
Sigma$26.51$12,986,906$56,777,30146,5291,979,690$6.56$51,773,999$52,493,493$11,531,873$30,732,644
Rackk City Bikes$19.89$8,346,108$81,769,42475,9082,012,695$4.15$39,830,691$40,031,960$7,063,594$18,515,508
E.N.T.E.R.T.A.I.N$18.30$4,532,311$51,446,89452,6932,000,000$2.27$35,780,698$36,600,698$3,374,638$17,156,023Sugma
Wheelin N Dealin$11.46$2,046,567$45,584,48149,1802,000,000$1.02$22,822,792$22,922,791$1,021,600$11,859,184
Munchy Bikes$4.20$992,044$32,076,38440,4032,000,000$0.50$7,138,170$8,408,670$400,060$6,606,833Rackk City Bikes
RHO Inc.$2.68$2,315,730$45,356,52044,0342,000,000$1.16$5,139,330$5,355,731-$3,322,844$7,278,606
Pedal$0.86-$1,671,352$20,819,83830,5622,000,000-$0.84$1,722,144$1,722,144-$1,671,352$3,218,150
Wheelie Cool Bikes$0.26-$3,985,044$12,114,65329,2412,800,000-$1.42$737,744$737,743-$4,842,469$2,287,387Rho Inc

GIven everything that's been said so far, it will be no surprise that Sugma is at the top of the board. Look at their sales ... $94m. Tidy. BUT, that didn't produce the top profit. That honour goes to Sigma. One of my rules of thumb is "Where profit goes, so goes SHV", so I'm really curious to see how much Sigma can increase its SHV, and how high up the leaderboard it can go. Clearly, they can overtake  Jack It up, but could they also catch PeakPerformanceBros? Sigma will need to really grow their sales to do that.

Returning to Sugma, when I look at their key figures (or at least what I think of key figures), it's interest to see that that most of them are in the medium zone; they're running a very balanced bike.

On the other hand, the number two firm,  PsiclePath is less balanced, and like all the firms in the EU they are spending big on advertising. That's also true for their subsidary PeakPerformanceBros who are the biggest spenders on advertising of any firm in any region. I wonder where on the 'curve' they think they are. Without the contribution of PeakPerformanceBros to PsiclePath's SHV (about 37 of their $46 dollars), it's hard to know where they would lie on the table. That said, both will need to sprint hard to catch Sugma.

Jack It Up, having sold Pedal have kept their place on the leaderboard. Given the tidy turn around by Pedal, do they regret that sale? Pedal seem to have things under control and are turning their bike around. Good on them, I say. As an aside, to Pedal, nice quality rating ... but I wonder if you are spending too much on quality.

Jack It Up are being tailed by Sigma. I'm still smiling over the $12m profit they made. Yes, they've gone a little crazy in their marketing, but in many ways they a doing the same as Sugma in as much as all their other key figures are in the medium zone.

Rack City Bikes remains in the middle of the pack. Maybe that's because their quality is high, their advertising is high, their promotion is high, and their cost of production is high. Maybe they need some of the cost discipline that Pedal have learnt. Again, this firm is benefiting from the effects of owning Munch Bikes, without whom they would probably have slid down the table.

Wheelin N Dealin seems stuck. There's been no real movement in their share price for 4 or 5 years. What will it take for them to turn in a more respectable profit than the 4% they are currently achieving. 

Have RHO Inc lost their way? Once the darlings of the leaderboard, they've seen a collapse in their share price. They're be some angst over that. 

At the bottom of the leaderboard is Wheelie Cool Bikes. They too seem a bit stuck, and slowly drifting towards insolvency ... owned by RHO Inc, once could buy both companies for about $11m. That doesn't seem too much, but could they then be turned around.





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