Ngenic: Updated fair value range following the ended debt restructuring
Research Update
2024-12-23
14:19
Redeye updates its estimates and fair value range following Ngenic’s share issue announcement and Q3 report earlier in November. With the company now being out of debt restructuring, we continue to see an exciting business case for Ngenic, especially with the recently signed partnership with Svea Solar, divested IMD business, and cost savings measures. Coupled with the ongoing rights issue, Ngenic should be able to reach positive EBITDA through this capital raise, and we do not rule out further strategic partnerships being signed in 2025.
Mattias Ehrenborg
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2024 has been a turbulent year for Ngenic. Softening sales, high debt levels, and weak cash flow caused the company to enter debt restructuring in Q2 2024. A financing solution was presented in November, where Ngenic will issue units (consisting of shares and warrants) through a partly guaranteed rights issue (34% by subscription undertakings and 44% guarantee commitments), which will allow the company to raise SEK34m in shares and SEK34-51m in warrants (pre fees). The company is now out of debt restructuring and can focus on its core business once again, and the capital raise should be sufficient to allow Ngenic to pay down debt and reach positive cash flow.
After the financing solution was presented, Ngenic released its Q3 report on 29 November, which was soft on the top line (as expected). Sales amounted to SEK2.4m relative to the comparable sales number of SEK13.9m Q3 2023. However, EBITDA managed to hold up relatively well at SEK-4.2m relative to SEK-1.3m in Q3 2023. The gross margin was also high at 64% relative to 66% in Q3 2023. We expect Q4 2024 to be softish, reporting SEK5.8m in sales, which includes a down-payment from Svea Solar, black Friday campaigns (incl. Tibber), and 50% of the quarter being out of the debt restructuring. We think 2025 will be a year where Ngenic can catch its breath and refocus on its business.
We update our estimates following Ngenic’s divestment of its IMD business, cost-saving initiatives, and our updated sales curve. We expect Ngenic to raise SEK34m through its share issue in Q1 and then another SEK34m (pre-fees) in May 2025. This has a significant impact on the shares outstanding, which has a big impact on our fair value range, as the total number of shares could increase by 50x. All in all, our new fair value range is SEK0-16.2 with a base case of SEK2.4 per share, which we expect to reduce to SEK0.07-0.51 with a base case of SEK0.24 per share following the separation of the units on 4 January.
SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
Revenues | 26.5 | 69.9 | 20.1 | 31.5 | 44.0 |
Revenue Growth | 40.3% | 158% | -71.3% | 55.0% | 41.8% |
EBITDA | -17.8 | -9.0 | -21.5 | -4.2 | 0.96 |
EBIT | -25.5 | -19.3 | -32.4 | -15.9 | -10.6 |
EBIT Margin | -90.1% | -26.4% | -155% | -48.8% | -22.9% |
Net Income | -26.0 | -20.0 | -26.5 | -15.9 | -10.6 |
EV/Sales | 7.6 | 1.3 | 1.9 | 0.6 | 0.4 |
EV/EBIT | -7.9 | -4.7 | -1.2 | -1.2 | -1.7 |
Our estimates have been under review since Q1 2024. Since then, sales have developed far slower than expected, which is illustrated in the table below. This seems to be driven by a soft market but also due to the fact that Ngenic has been under debt restructuring, halting new sales due to uncertainty. Therefore, we take a more conservative approach going forward, reducing our sales significantly, which also includes the divested IMD business (which reduces the sales volumes).
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