Sunday, 24 August 2008

Accell Shares Get Jolt as Electric Bike Sales Surge

Original Article

Aug. 22 (Bloomberg) -- Accell Group NV Chief Executive Officer Rene Takens is powering up an electric bike to outpace Giant Manufacturing Co., Asia's largest bicycle maker, and help reverse his stock's 28 percent drop in the past year.

The company's Sparta ION GLS travels up to 87 miles (140 kilometers) before its batteries need recharging, 17 percent farther than a comparable model from Taiwan-based Giant. The new engine means Accell, based in Heerenveen, the Netherlands, is worth at least 30 euros a share, 23 percent more than yesterday's close in Amsterdam, said Marc van der Maale of Aviva Plc's Delta Lloyd Asset Management, Accell's biggest investor.

Rising gasoline prices and worsening road congestion have prompted Europeans to seek alternative ways to get around, boosting demand for electric bikes. In Germany, a $2.5 billion bicycle market that's Europe's largest, battery-powered bikes accounted for 1.5 percent of the 4.6 million bicycles sold in 2007, according to Bike Europe magazine. Sales of electric models may rise to 5 percent in a few years, Takens, 54, said.

``The e-bike is an enormously interesting alternative to the car,'' said Frederik van Beuningen, a director at Darlin NV, Accell's second-biggest shareholder, with an 8.5 percent stake. ``The real markets are the countries surrounding the Netherlands, where it's just a bit hillier,'' he said.

Accell has fallen on concern that higher aluminum and rubber prices may drive up costs of its city, mountain and speed bikes sold under 17 brands, including Batavus and Koga. Accell plans to raise prices by as much as 5 percent for some models next month, Takens said. The company generated 44 percent of its 476 million euros ($704 million) in 2007 revenue from the Netherlands.

Buying Shares

The shares added 58 cents, or 2.4 percent, to 25 euros in Amsterdam, the biggest jump in a month. Giant slipped 0.6 percent to NT$82.50 in Taipei.

Van der Maale, 39, added 169,000 Accell shares for a 1.8 percent stake, according to a June regulatory filing. He manages the 170 million-euro Delta Lloyd Select Dividend Fund. Delta Lloyd Asset Management owns more than 20 percent of Accell, according to spokesman Rob Nieuwenhuizen. Sue Winston, a London- based spokeswoman for Aviva, the second-largest U.K. insurer, declined to comment on its Accell stake held by Delta Lloyd.

CEO Takens made the Sparta engine 70 percent more powerful. The new pedelec -- for pedal electric cycle, as it's commonly called -- travels as fast as 25 kilometers an hour with pedal support. The model, with the batteries embedded in the bike's frame, will go on sale Sept. 1 for 2,399 euros in the Netherlands, compared with 1,899 euros for Giant's Twist Comfort, which carries its rechargeable batteries in saddlebags.

Pedelecs ``had a terrible image, like a bike for the disabled,'' Takens said.

Bridges, Dykes

The older Sparta ION models quickly overheat in hilly areas, according to Hannes Neupert, president of ExtraEnergy e.V., a Germany-based consumer group that tests bicycles. ``In the Netherlands, the steepest climb is a bridge or a dyke,'' he said.

Takens's next stop is Friedrichshafen, a German lakeside city close to the Alps, which will hold Europe's biggest bicycle fair Sept. 4-7.

Some of the company's 1,700 employees are working overtime as demand rises, Takens said last month. Accell made two-thirds of all electric bikes sold in the Netherlands, according to Frank van Wijk, an analyst at SNS Securities in Amsterdam. Pedelec sales in the Dutch market reached 89,000 units in 2007 and 25,000 units in the first quarter, industry group Bovag estimates.

``It's clear it's a hit in the Netherlands,'' said Van Wijk, adding that Accell introduced its first pedelec in Germany two years ago ``when the e-bike was still in its infancy.''

Demand Increases

Van Wijk is one of two analysts who advise buying Accell shares. Three say hold and one recommends selling.

In the Netherlands, 6.4 percent of the 1.4 million new bikes sold last year were battery-assisted, more than four times the ratio in Germany, figures from Dutch and German industry groups show. The German market for e-bikes will expand 75 percent this year to 120,000 units, outpacing the 43 percent growth predicted for the Netherlands, Neupert said.

Competition is set to intensify in Europe, as cheaper bikes from China arrive in German and French shops, pushing prices lower, according to Han Goes, a former product development director at Giant and now a consultant at Lelystad, Netherlands- based Q Square, which advises bicycle makers including Giant.

The average cost of a bicycle in Germany is 350 euros, about half of that in the Netherlands, Goes said. Aldi Group, Germany's largest discount retailer, recently offered e-bikes for 699 euros each. In China, a pedelec costs between 2,000 yuan ($292) and 4,000 yuan, he said.

Schwinn, Mongoose

Accell's 2007 revenue from bikes and parts was about 75 percent more than Taichung, Taiwan-based Giant. The biggest bicycle manufacturers in North America include Dorel Industries Inc., the maker of Schwinn and Mongoose brands, and closely held Trek Bicycle Corp. and Specialized Bicycle Components Inc.

Before today, the company's shares had underperformed Giant by 52 percentage points and Montreal-based Dorel by 39 points in the past year. It trades at 8.9 times estimated 2008 earnings per share, versus 13 for Giant.

Takens holds a master's degree in engineering from the Technical University of Twente. He headed the Italian unit of CSM NV, a supplier of ingredients to bakeries, before becoming Accell's CEO in September 1999. Since then, Accell's stock has jumped fivefold, with revenue and profit increasing every year.

The shares, which will join the Amsterdam Small-Cap Index next month, return a gross dividend yield of 5 percent, compared with 4.7 percent for the 25-company benchmark. That's one of the reasons Delta Lloyd's Van der Maale is attracted to the stock, he said.

``Nowadays, people still mock about the electric bike,'' he said. ``That image will change.''

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