Andreas Eriksson | 2021-10-20 10:05
Transformation into an industrial company with an undivided focus on High Performance filters
With the acquisition of the last remaining 15% of the shares in Eagle Filters, Loudspring is now increasing its ownership to 100%. The seller is Eagles founder Juha Kariluoto. In connection with the acquisition, Loudspring also restates its strategy of transforming Loudspring into an industrial growth company with an undivided focus on Eagle Filters’s business. The step is motivated by the fact that Eagle has been identified as the holding with the greatest value-creating potential, both for shareholders and for the climate. The price for the shares will be based on Eagle’s future EBIT during 2022 – 2024, and payments will be made in increments between 2023 – 2025. From a stock market perspective, the acquisition will mean a completely new level of transparency in Eagle, as the company has so far not had its own reporting available to Swedish investors. Industrial companies also enjoy higher valuation multiples than investment/holding companies.
High-performance filter solution for gas turbines
Eagle manufactures high-performance air filtration solutions for gas turbines that contribute to more efficient fuel utilization, higher energy production and extended turbine life. The market today is dominated by filters of lower quality where the rotor blades are broken down by dirt, which leads to poorer performance and thus poorer production. Eagle so far has only a small market share of the approximately 10,000 gas turbines around the world that can use the filters that Eagle manufactures. But looking only at the company’s existing customer base, a complete conversion to Eagle’s products, in all of these existing customers’ gas turbines, would translate to more than 10-fold growth for Eagle.
– We provide energy efficiency technology where it matters most – for the world’s largest point emitters of CO2. Eagle’s technology is being used by some of the world’s largest energy utilities and has potential to grow for the foreseeable future. Eagle Filters also has extensive competence in filter materials, and we will focus all our resources to help Eagle Filters maximize its potential, says Jarkko Joki-Tokola, CEO of Loudspring.
Filter for both today’s and tomorrow’s gas turbines
According to market research company Mordor Intelligence, natural gas accounts for more than 23% of the world’s energy production today. As a power source, gas emits 50% less greenhouse gases than oil, but with a significantly larger footprint than solar and wind power. The importance of solar and wind power will certainly only become even greater, and here Eagles’ filters can play a crucial role in balancing the supply of energy in renewable production. As is well known, solar cells do not generate energy when the sun is not shining, but the excess from the solar hours can be converted into hydrogen, which can then be burned in gas turbines by the kind the Eagles’ filter makes more efficient. This hydrogen combustion holds a potential for Eagle that is easy to overlook at first glance but offers a high future potential.
Surging prices for emission rights benefit demand for Eagle
In 2020, Eagle Filters reduced its customers’ carbon dioxide emissions by around 150,000 tonnes, a figure that is particularly interesting in light of the fact that the price of emission rights in the EU has increased by almost 100% since February this year, which provides further support for demand for Eagle’s filters. After two years of flat growth as a result of the pandemic, Eagle is now heading towards impressive growth in 2021 and with a record size pipeline for 2022. Loudspring already has a revenue target for Eagle of 3.3 – 4.5 MEUR for 2021 and 4.5 – 6.0 MEUR for 2022, which does not include Eagle’s new business area, respirators. With the concentrated pipeline and eased pandemic restrictions, we see good chances of a substantial growth boost in 2022, up to Loudspring’s anticipated levels. An assumption of an EBITDA margin of 20%, in line with the listed peers Donaldson Company and 3M, would mean an EBITDA well above 2 MEUR 2022. As for the remaining holdings, Loudspring has not yet announced their intentions, so it remains to be seen what will happen to Loudspring’s 38% stake in Nuuka Solutions, 20.5% in Sofi Filtration and 13.2% in Enersize, among others.
Read more about Loudspring’s Eagle Filters here
Loudsprings’s Eagle looking at a massive potential on the back of CO2 emissions reduction capacity
While the respirator business of Loudspring’s Eagle Filters has finally hit the market, the legacy high-performance turbine filter business stand on the brink of a scale-up, where a
GENERAL DISCLAIMER AND COPYRIGHT
This commissioned research report is for informational purposes only and is to be considered marketing communication. This research does not constitute investment advice and is not a solicitation to buy shares. Information provided here or on Emergers' website emergers.se is not intended to be financial advice. This research shall not be construed as a recommendation or solicitation to invest in the companies described. Emergers cannot be held liable for either direct or indirect damages caused by decisions made on the basis of information in this analysis. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
This material is not intended to be financial advice. This material has been commissioned by the Company in question and prepared and issued by Emergers, in consideration of a fee payable by the Company. Emergers charges a standard fee for the production and broad dissemination of a detailed note following by regular update notes. Fees are paid upfront in cash without recourse. Emergers may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.
Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained herein represent those of the research analyst at Emergers at the time of publication. The company has been given the opportunity to influence factual statements before publication, but forecasts, conclusions and valuation reasoning are Emergers’ own. Forward-looking information or statements contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.
Exclusion of Liability: To the fullest extent allowed by law, Emergers shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained in this material.
No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Emergers’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in this material may not be eligible for sale in all jurisdictions or to certain categories of investors. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
Investment in securities mentioned: Emergers has a restrictive policy relating to personal dealing and conflicts of interest. Emergers does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Emergers may have a position in any or related securities mentioned in this report, subject to Emergers' policies on personal dealing and conflicts of interest.
Copyright: Copyright 2021 Incirrata AB (Emergers)
This document is prepared and provided by Emergers for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.
This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.
Emergers relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Emergers does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.