Ngenic: Outcome in the rights issue
Research Update
2025-01-28
14:02
Redeye comments on the outcome of Ngenic’s rights issue, which was subscribed to 88%, injecting Ngenic with approx. SEK30m before deductions for fees and offsetting of debt. We adjust our fair value range accordingly.
Mattias Ehrenborg
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On Friday, 24 January, Ngenic announced the outcome of its rights issue, ending on 23 January. The rights issue was subscribed to by 88.3%, and Ngenic is injected with approx. SEK30.2m before deductions for issue costs (SEK3.1m, of which SEK1.3m refers to guarantee compensation if all underwriters choose cash comp.) and offsetting of debt (SEK21.3m). 44.4% of the rights issue was subscribed to with the support of unit rights, and approx. 8.5% was subscribed without. The remaining 35.4% was subscribed for by subscription undertakings and guarantee commitments.
We are positive to see that 53% subscribed in the rights issue with (and without) BTUs, although this figure could have been higher given the low subscription price. We had previously included 100% subscription in our estimates (given the low subscription price and guarantee commitments) and that Ngenic would be injected with SEK34m rather than SEK30m. However, given the press release two weeks ago stating that guarantee commitments had increased from 78% to 88% (which was positive), we think it signaled that 88% would be the likely outcome of the rights issue.
We update our estimates due to the lower-than-expected subscription rate (88% vs 100%), leading to a smaller capital injection than we previously expected (SEK30m vs SEK34m). The new share base is now 158 m vs our previous estimate of 171m (increasing our fair value per share). The lower-than-expected subscription rate reduces the equity potential in the TO1 program in May (due to fewer warrants being issued) but also reduces the potential dilution effect for non-participating shareholders. We are positively surprised to see Ngenic’s shares trading around SEK0.4 per share since this increases the likelihood that the TO1 warrants will be subscribed for in May (price range of SEK0.20-0.30) – which we consider important for Ngenic’s liquidity as it can inject an additional SEK30-45m. Ngenic’s Q4 report is due on 28 February.
| Key Financials | |||||
|---|---|---|---|---|---|
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Net Sales | 26.5 | 69.9 | 20.1 | 31.5 | 44.0 |
| Sales Growth | 40.4% | 164% | -71.2% | 56.4% | 40.0% |
| 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 | 0.9 | 0.0 | 0.0 |
| EV/EBIT | -7.9 | -4.7 | -0.6 | 0.0 | 0.1 |
Case
Riding the trend of electrification
Ngenic operates in the smart energy management sector, offering solutions optimising heating and energy usage in residential and commercial properties. The flagship product, Ngenic Tune, is a smart thermostat system that is connected to the heat pump and enhances energy efficiency by balancing user comfort and optimising electricity prices. It also offers the Ngenic Track for real-time energy monitoring and analytics. The business model is a combination of product sales and subscription services, earning high gross margins. Ngenic is exposed to several key market trends, such as increasing energy efficiency focus and customers who want to optimise their energy consumption and reduce their electricity bills in times of high electricity prices. Ngenic is on the path to reducing its cost base. It has signed a strategic partnership with Svea Solar, which, together with the ongoing rights issue, should allow the company to reach EBITDA-positive territory by the end of 2025.
Evidence
Hard to grasp at first glance
Ngenic has a broad range of products and services directed against property owners and energy companies. The unique selling point stems from how they use insights from consumers, the price of electricity, and the congestion in the energy grid to sell a packaged subscription solution to both consumers and energy companies. It’s been difficult for data-driven companies such as Ngenic to capitalize on the opportunity so far, but things are coming together. We thnik the strategic partnership with Svea Solar is a testament to Ngenic's offering.
Supportive Analysis
First of all, it has shown their value in various projects. Secondly, a market is being formed where their role as an intermediary between producers and consumers, called aggregator, will become clear. Thirdly, regulations force customers to switch to connected (smart) solutions offered by Ngenic and others.
Challenge
Still a few years left
The company has ramped up growth in recent quarters especially driven by its hardware sales. We still think there is a few years until the company will be able to capitalize more on its main packaged subscription solution to consumers and energy companies.
Competition
Competition within smart energy management solutions and electricity price optimisation is high. Furthermore, heat pump OEMs often provide these services as a default configuration in new models. There is a risk that customers rather opt for these solutions rather than Ngenci's retrofit solution, although we think that Ngenic's proprietary data allows for better performance and, therefore, an attractive value proposition for its customers.
Valuation
Wide fair value range
We derive our fair value range from a fundamental DCF framework for three scenarios: base case (most likely), bear case (pessimistic), and bull case (optimistic), using a WACC of 14% across all scenarios. Our updated fair value range is SEK0.07-0.58 with a base case of SEK0.27. The fair value range is wide, owing to the unpredictable nature of Ngenic’s long-term growth and profitability, but also due to the ongoing rights issue.
Disclosures and disclaimers
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