Andreas Eriksson | 2022-03-04 12:00
Crucial efficiency improvement for energy transformation
As the fundamental transformation of Loudspring continues, with a strategic shift towards becoming an industrial company, Loudspring now seek attractive exits for its other portfolio holdings, to allocate all resources and focus to Eagle Filters. With an advanced filter technology for gas turbines Eagle Filters help some of the world’s largest CO2 emitters to reduce their energy consumption and cut emissions.
Industrial filters for gas turbines is a growing industry that covers more than 23% of the world’s energy production. Gas powered generation has also come into focus lately with the shift from fossil fuels into the renewable energy sources. Even though the carbon footprint of natural gas is significantly higher than solar and wind power there is a need for a stable energy source when the sun is not shining and the wind is not blowing. Therefore Eagle can play a big role in this energy transformation as the excess from solar hours can be converted into hydrogen, which can then be burned in the gas turbines where Eagle’s filters help make them more efficient.
Following a rise in material costs during the pandemic, Eagle looked for new ways to manufacture their industrial filters. Through combining different materials available, Eagle started to manufacture their own filter components in a very cost efficient way, which resulted in new filter material. The new material has a very large area of use such as ventilation in real estate. This opens the door to brand new markets where the sales cycle is considerably shorter than for industrial gas turbines, while also giving Eagle an edge as a material science company.
Financial muscles base for accelerating growth
At the end of February, Loudspring announced the sale of a 18,1% stake in Nuuka Solutions (Loudspring previously held 42,3% ownership), a provider of AI software to real estate owners, for 2 MEUR. Loudspring will retain a 24,2% ownership after the transaction. The sale underscores Loudspring’s strategy to become a pure industrial.
To strenghen its financial muscles further, Loudspring has announced a rights issue of 2,5 MEUR (of which 52% is guaranteed) where existing shareholders gained one subscription right for each share held on the 24th of February 2022, and two subscription rights entitles the subscription of one new share.
The proceeds from the Nuuka sale and the upcoming rights issue should give Loudspring enough financial muscles to materialize the potential in Eagle. With a strategy covering continuous improvement of R&D, further additions of key personnel and streamlining of the entire organization, Loudspring seek to grow Eagle’s business with 30% annually to reach an EBITDA-margin of 20% in the medium to long term.
High potential with merely existing customer base
Another aspect of the transformation to an industrial company is that the multiples are far more generous compared to those of investment companies. Comparable peers such as 3M and Donaldson are valued in a range of 2,3-2,7x Sales and 10-14x EBITDA. Applying the same multiples to our projection for Eagle, at 8 MEUR in sales and an EBITDA margin of 20% in 2024, this supports a fair value range at 16 – 20 MEUR (160 – 200 MSEK), while there is still a lot of potential on the upside should Eagle’s existing customer base convert all their gas turbines to using Eagles’ filter, which would instead translate to 10-fold growth for Eagle.
Read more about Loudspring’s Eagle here
With its high-performance gas turbine filters, Loudspring’s Eagle Filters help customers increase energy production by 9%, improve fuel efficiency by 2.5% and increase lifespan of the turbines. The
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