LMPG Inc (LMPG) Files to List on the TSX Index

Posted on June 3, 2021 by Mathieu Litalien

June 14, 2020 - On Friday last week, LMP announced that it was halting current IPO plans as it cited "non-optimal current market conditions."

The company intends to revisit its IPO plans once the "market conditions are less volatile".

June 3, 2020 - Earlier this week, LMPG Inc filed its preliminary prospectus as it seeks to list on the TSX Index under the symbol "LMPG". The company is seeking to raise $300M and is looking to list between $15-$17.50 per share. 

Assuming the company prices at the mid-range ($16.25)  7,692,308 Subordinate Voting Shares will be distributed under the treasury offering and 10,769,231 Subordinate Voting Shares under the Secondary Offering, for a total of 18,461,539 Subordinate Voting Shares under the Offering (or 9,076,923 Subordinate Voting Shares issued by LMPG and 12,153,846 Subordinate Voting Shares sold by the Selling Shareholders, for a total of 21,230,769 Subordinate Voting Shares if the over-allotment option is exercised in full).

On a fully diluted basis, the company will have 50,321,555 subordinate voting shares and 8,269,606 multiple voting shares outstanding which values the company at C$952M at the mid-range. 

Speaking of the selling shareholder, you'll notice a familiar name - Bull List Stock Power Corp. LMPG, formerly known as Lumenpulse Inc. was taken private by its founder and Power Energy Corporation, a wholly-owned subsidiary of Power Sustainable Capital, for $590 million in cash back in 2017. 

Much like it benefited from the LEV listing, it will benefit once again as it will be booking double-digit gains on its Lumenpulse investment.

LMPG  is an industrial technology company that designs, develops, manufactures and sells a wide range of high performance and sustainable specification-grade smart LED lighting solutions for commercial, institutional and urban environments. It dubs itself a "Pure-play Specification-Grade Smart LED Lighting Solutions" company.

The company has a large addressable market and estimates it is currently valued at $78B, of which $23B is tied to specification-grade category. 

That $78B is expected to reach $263B by 2030 and one can assume the specification-grade demand to grow accordingly. 

The company's products are benefiting key tailwinds such as smart cities and buildings, IoT, Energy efficiency regulations and increase infrastructure spending.

The company had has a pretty impressive growth profile. Since 2014 it has closed on 7 acquisitions and grew from a single brand and application market that generated $56M in revenue to a multi-brand group with multiple applications which generated $268M in revenue in 2020. 

That being said, COVID-19 has impacted the company's growth profile. Prior to 2020, the company was experience strong double-digit revenue growth. In Fiscal 2020, revenue dropped from $314M to $268M as projects were put on hold, delayed or outright cancelled. 

On the bright side, adjusted EBITDA and cash flows remained quite strong in 2020 and it seems well positioned for a rebound in the later half of Fiscal 2021. 

Of note, the LMPG does plan on paying a dividend beginning in the third quarter (ending September 2021) in the amount of $0.055 per share which would give it a yield of 1.3% at the mid-range of the offering.

From a valuation perspective, the company is priced at 4.26 times sales and since the pro-forma post closing debt/cash positions are still blank in its preliminary prospectus, can't quite get an EV/EBITDA ratio just yet.

In terms of competition, traditional lighting companies including those specializing in LEDs can be considered competitors - this is a vast list. Notable companies include Phillips, 3M and Hitachi among others. Keep in mind these are not lighting pure-plays and are large industrial conglomerates. 

Let's see where this prices. The company was on strong footing pre-COVID but it has really stunted growth. It is also worth noting that revenue in the first quarter of Fiscal 2021 is also  down from $62.9M in Q1 of Fiscal 2020 to $55.8M - a drop of 11.8%. Construction still hasn't ramped up and it may take until the second half for the company to return to 2019 levels of revenue. 

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Mathieu Litalien

About the author

Mathieu is an individual investor and has been investing part-time for the better part of the past 20 years. He is primarily interested in fundamental analysis, focusing on the long-term and his portfolio is composed primarily of dividend-paying equities. Mathieu has a moderate risk profile and also looks for growth and value. His passion for finance and the markets have led him to his MBA and writing for Seeking Alpha and Stocktrades. Mathieu also focuses primarily on stock research and content production for Stocktrades.ca Premium and the Stocktrades blog.