Shares digital

Electric vehicle maker Tanfield (TAN:AIM) has lashed out at stockbroker Investec after it issued a sell rating on the company, further depressing the shares, which lost over a quarter of their value in a fortnight.

Chief executive Darren Kell says Investec’s doubts over Tanfield ramping up production quickly and misleading investors over a new contract win were ‘so out of kilter’ with previous views.

Investec analyst Chris Dyett criticised Tanfield for believing it could increase annual production from 250 to 10,000 vehicles by 2010. He said this would only be possible if market conditions do not decline; the assembly ramp-up goes without a hitch; and competition doesn’t increase.

Kell retaliated by saying: ‘Investec has confused management aspiration with market forecast.’

Tanfield is close to increasing assembly from ten to 30 vehicles a week to produce up to 950 units by the year end. ‘We’ve already proved our capabilities by increasing production of powered access platforms from 25 to 200 per week, including more complex and bigger units. Building electric vehicles is no different a task,’ insists Kell.

Dyett has also suggested that Tanfield misled the market in its pre-Christmas trading update by claiming to have received its ‘largest new customer order’. He pointed out that the deal is with a distributor and potentially numerous end customers, rather than a single recipient.

The distribution partnership between retailer Ray Keeley and importer David Mullen has yet to sell all 100 Tanfield units but is committed to take the vehicles, notes Dyett.

Tanfield is one of the most traded stocks on Aim. Its share price increased more than 11-fold between February 2006 and July 2007, rising from 18p to 203.5p.

According to Kell, August’s market downturn triggered the recent share

price weakness. ‘We’ve been a victim of our own success. The credit crunch prompted hedge funds to cash in on any decent investment returns, which included us.’ He added: ‘We suffered disproportionately and have now become a target for traders taking out short positions.’

In the past six months, Tanfield’s share price has more than halved. Investec argues that the two divisions of the company have reached ‘a suitable level of maturity’, using its sum-of-the-parts valuation to derive a fair price of 112p. By last Friday, Tanfield had fallen to 101.25p.

On Monday, Investec shifted its rating to a hold, saying the share valuation had reached a more suitable level, although lowering its price target to 101p. A reassuring note from house broker St Helen’s Capital pushed the shares back up to 108.75p on Monday morning.

There are several catalysts that could revive the share price further. Stockbroker Landsbanki will shortly initiate research coverage on the company. Kell says several directors, including himself, may invest their own money in Tanfield shares once the current closed period ends.

Shares says: The price correction was inevitable as hype pushed the stock beyond its rational valuation. But worth hanging on in hope of actually cracking the US market.