Industrial Alliance initiates coverage of ZENN Motor with a $2.75 target

Industrial Alliance analyst Neil Lindsell says Zenn’s 10.7% of EEStor means it would benefit from every other energy storage market it enters, not just the automobile market. The Industrial Alliance says this is not insignificant, estimating the value of all markets at (US) $74-billion by 2015, 80% of which would come from rechargeable batteries. The potboiler that is the story of Zenn Motor Company (TSX:ZNN) added another chapter earlier this month when the company issued a press release that it had received an updated report from its consultant John Galvagni.

The company said Galvgani had observed “saw significant technological progress” at EEStor. Zenn partner EEStor claims it has invented a created a storage unit for the automotive industry that has nearly three times the capacity of the next best technology. The process has been fraught with doubt and delay, as critics cite a lack of transparency and supporters offer that the process must be so because of the sensitive nature of the intellectual property.

Industrial Alliance Securities Analyst Neil Lindsell says that while there is a degree of uncertainty in execution, if the EEStor technology lives up to its promise it will simply make most other batteries obsolete. He cites forecasts that say the lithium-ion battery market will be worth (US) $8.9-billion by 2015, noting that a 50% share of this market to EEStor would be make ZENN’s exclusive rights to supply this market for most vehicles worth about $2.2-billion. In a research report to clients Wednesday, Lindsell initiated coverage of ZENN Motor with a Speculative Buy rating and $2.75 target price.

ZENN Motors, which was founded in 2000, originally planned to build its own “Zero Emission No Noise” electric cars. The result was NEV, or “Neighbourhood Electric Vehicle” which hit the markets in 2006. These vehicles were called LSV’s or “low-speed vehicles”, because their top speed was a mere 40 km/h. The NEV, however, never went into mass production. In 2009, Zenn decided to shift directions, and to instead focus on building a highway capable electric drive system to market to major auto manufacturers. In April of 2007, Zenn invested 2.5 million for 3.8% of EEStor, then increased that interest to 10.7% with another $5-million investment in mid-2009.

Lindsell says Zenn’s 10.7% of EEStor means it would benefit from every other energy storage market it enters, not just the automobile market. The Industrial Alliance says this is not insignificant, estimating the value of all markets at (US) $74-billion by 2015, 80% of which would come from rechargeable batteries.

At press time, shares of ZENN Motor were down 3.8% to $.76 cents.

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