TOROTRAK a ten bagger in four years




The world is full of gamblers. In casinos punters will bet on black or red, odds or evens with slightly under 50% chance of winning a sum equal to his stake. If ever there was a share worthy of a gamble, then Torotrak it is. Tails you lose everything, but heads….well…heads you could win an absolute fortune.

Torotrak are at the forefront in developing an Infinitely Variable Transmission. A transmission that always delivers the perfect power and or fuel efficiency required. Trials have proven a 25% improvement in efficiency.

Still having a brilliant product isn’t everything, ask Dyson. You need to open up markets and despite the extremely secretive nature of the automotive industry, companies as large as Ford, General Motors and BMW have shown an interest. In November last year Toyota, who originally displayed an interest, abandoned their potential licence with devastating effects on Torotrak’s share price. They cited vibration problems. However through its daughter company, Aisin, 20% owned by Toyota, they are still keeping in contact with Torotrak and attending presentations and AGMs. Aisin are the world’s largest transmission producer.

Torotrak obviously learned from this and has been careful to ensure full development before releasing its test vehicles to Ford and GM. In July 01 the GM Silvano was despatched to the US and Ford’s Explorer is expected to be sent soon.

Torotrak’s objective to have 80% of the vehicle transmission market by 2010 is pretty powerfull and if it is to have any chance of success it must convince the big boys. It appears that they may now be at the final hurdle with Ford, GM and BMW. This next year of testing will be the most critical.

Torotrak’s fuel efficiency figures of 25% are impressive so all that needs to be proven is the robustness and driveability of the product. Reports on internet bulletin boards by test drivers including an engineer who have driven a Ford Mondeo, with the front wheel drive version, are positive.

The concept of the IVT is not new and I believe there were some original designs back in the ‘30s which failed to meet requirements. Today with the assistance of Japanese component maker ,Koyo Seiko, and Shell who developed the transmission oil, we now have a product that will work in the extremes of all temperatures.

It’s sounds too good to be true, and you know what they say about that, don’t you? Well what’s the down side?

First the product may not yet be up to requirements. If so then bringing it to requirements would only be a matter of time. However Torotrak say that the series 3 is well ahead of the targets set by its customers.

Next could be competition. Are Toyota developing an IVT of it’s own? Is anyone else? Certainly Nissan’s half Toroidal CVT doesn’t seem to have set the world alight.

CVT is ready and proven, although it doesn’t have the same fuel efficiency and I understand it is not strong enough to use in powerful vehicles. And then there are hybrid [battery/ICE] vehicles which Ford , GM , Toyota and a host of others no doubt are working on.

Six speed automatic gearboxes are now being put into production but the word is that these only save 3% in fuel economy.

One fast approaching solution may be in Fuel Cell technology. At the moment though it is still too expensive to be realistic.

Also we mustn’t forget the way America’s politics works and the powerful automobile lobby are encouraging Congress to restrict any alteration to fuel consumptions as laid down under CAFÉ.

So what has Torotrak got going for it.

A product that is in an advanced stage of development, with a proven fuel efficiency. Shareholders who attended the AGM in July 01 were very impressed with the professionalism of the Company of its Officials and of the product, with many receiving demonstrations.

America is coming under increasing pressure to reduce greenhouse emissions and despite President Bush withdrawing from the Kyoto Agreement he will eventually have to concede that efficiencies have to be made. It is said that 80% of Americans would support car fuel economies.

Within the US pressure is being brought to bear to reduce emissions from Sports Utility Vehicles and Light Trucks by 25% under CAFÉ. If approved by Congress, which I believe is only a matter of time, then Ford and GM have a ready made solution in Torotrak.

Thereafter we may see a domino effect where virtually every vehicle manufacturer will have to join up to compete in fuel efficiency terms. After the successful integration of the rear wheel transmissions will come the front wheel versions and versions to fit all vehicles large and small.

Whilst the World continues to embrace the internal combustion engine then the future must be attractive for Torotrak,. And if it can get 80% of the market by 2010 then the sky’s the limit for the share price.

The share price recently built up in anticipation of the AGM held on the 19th of July but has fallen back in the absence of further news therefrom. However the Chief Executive, Maurice Martin and Financial Director, Rebecca Joyce remained enthusiastic about the future.

Ford, GM and Getrag [acting for BMW] are said to have satisfied the Concept Readiness stage and are working through the Implementation Readiness stage. This looks at issues relating to high volume production and customer acceptance, and typically reaches it’s conclusion 12 to 18 months after CR.

Further the big automobile producers have invited Torotrak to give a presentation to the Society of Automotive Engineers in August 01 in Detroit.

What we mustn’t forget is that Torotrak are only developing the IVT. They will not mass produce it. All the evaluations taking place now are an effort to convince the volume produces that the millions of pounds needed to implement production will not be wasted.

Eventually Torotrak will be fitted into some motor vehicles and assuming customer acceptance to this culture shock, everyone will focus on the 25% fuel savings. Then wow. With nothing else currently coming close everyone is going to want to jump on the band wagon.

In competition there is usually only one winner. Who uses the accomplished betamax video system nowadays?

The Share Price.

So with so much going for it why is the share price languishing.

Well consider this. In a recent article in the Sunday Times, Harm Tegelaars explained why he is taking Cannons, the health and fitness operator, private. What really grated Tegalaars was the short-termism prevalent in the City, with the constant pressure of institutional shareholders breathing down his neck demanding immediate gratification.

The Prudential is one such institution that is currently reducing its exposure. And we know that after the Toyota fiasco there have been delays to ensure that the product is right. The City does not like problems and it does not like delays.

We are informed though that 90% of the original floatation subscribers still retain all their shares. Even after the Toyota inspired drop. This in turn limits the free float so supply and demand will result in a wide fluctuation in the share price. Until the confirmation, or otherwise of GM and Ford take up, I would expect between the share price to fluctuate anywhere between 150 and 200p.

However as I type this I am reminded of a quote. “ Do you hear that Mr. Anderson? That is the sound of inevitability.” “That is the sound of the IVT in you new Ford.”

PS. Anyone know what happened to Mr. Dyson?

Yes it’s still a gamble, but for any investors out there who fancy a punt, what better gamble. I for one am going to tuck some away. If you are a trader then place this on top of your watchlist for sooner or later this baby’s going into orbit.

All IMHO of course and not intended as advice.
Mav aka Stoker.....see you all again soon.
Nice to hear from you again. Hope you are well. You may recall I was one of those that was caught in the "Toyota Drop" and was forced to bail out.I agree with your sentiment 100%, and your analysis and conclusion.Unfortunately, TRK has left a bad taste in my mouth and I don't have the heart to go back in...yet :)
Thanks for the write-up.
Will we see you soon in the chat room?- if not, all the best M8
It's a pity TRK were not at this stage five or so years ago.
To quote from the NatWest investor review of Sept' 00
" The shares still look exceptionally cheap at 570p ... back of the envelope calculations suggest TRK could be making profits in excess of £400 mil by 2010"

By that time even better automotive engineering designs will be established ... direct drive ... fuel cells etc.

I hope i'm wrong because the IVT is a great piece of engineering.

I've only held once... when i could not resist at 104 in Jan ... i sold too soon, as usual, at 159 .

Good luck

As a newcomer to this board with an ongoing interest in TRK it seems a shame that with a stock of this potential the thread should have gone cold and now be looking somewhat outdated.
Admittedly a lot of water has gone under the bridge in the last couple of years not to mention the price fall after the Toyota & GM decisions. This has been compounded by (you either luv him or hate him) Simon Cawkswell (alias evil knievel) shorting the stock down to about 30p.
At these levels the believers could not resist topping up their holdings with the current price now seeming to have a strong support level at about 55p. All the positive points made in the opening thread are still basically valid with the time scale to adoption a great deal closer than before, so why have the posts dried up?.
I look forward to some interesting discussion in the near future - as always DYOR and good hunting.
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