RBC Comments... Pump and Dump !!!RBC Pump and Dump 2 days before earnings announcement... IMHO....
Lumenpulse Inc. Initiating coverage - Growth at the speed of light Our view: Lumenpulse (LMP) is poised to capture an increasing share of the fast growing LED lighting market, which we expect will drive very strong revenue, margin, and earnings growth. We believe the current valuation is compelling at 18x C2016E P/E, well below expected earnings growth of 40%+ annually during the next several years. We are initiating coverage with an Outperform rating, $25 price target.
Key points: Expecting very strong revenue and earnings growth: We expect secular demand drivers and strategic moves to deliver revenue CAGR of >40% through F2019E. Gross margin improvement and operating leverage should drive F2019E Adj. EBITDA to $80MM (from $4MM in F2015E) and Adj. EPS to $2.17 (from $0.12). Our scenario analysis shows an attractive risk/reward profile, and suggests the share price could be >$40 over the next several years.
Capturing an increasing share of a large and growing market: LEDs are becoming the predominant lighting modality, and LMP expects its target market is expected to grow from $11B in 2014 to $38B in 2020E, a 22% CAGR. LMP should be able to outpace this growth as it expands its product portfolio and global reach to increase its addressable market. We expect these efforts will likely be accelerated by targeted acquisitions. Margin improvements to accelerate earnings growth: We forecast Adj. gross margins to increase from 44% in F2015E to 52% in F2019E, driven by manufacturing cost saving initiatives and higher fixed cost absorption. This, and significant operating leverage, should drive Adj. EBITDA margins to 19.5% in F2019E from 4% in F2015E. Strong products targeted at the right market: With the same LED chips generally available to all fixture manufacturers, LMP differentiates itself as a supplier to lighting professionals through the sophisticated design and engineering of its products. Performance and customization are key in the high-end specification-grade market, and LMP’s solid product offering, suite of embedded technologies, and configure-to-order model have allowed it to successfully compete with larger global firms. This aggressive growth plan is not without risk:
Our forecast assumes that LMP can successfully launch products for new applications and enter new geographies. These are not easy tasks, and we do expect LMP to face competition. The high growth rate may also lead to lumpy quarters and earnings volatility (which has pressured the shares recently). LMP shares attractively priced given the forecasted earnings growth and progress since the IPO: We believe that LMP shares trade at a compelling valuation (18x C2016E EPS of $0.89) versus the peer average (17x) and its expected EPS growth rate. We believe the company’s significant progress since the April 2014 IPO (at $16) is not reflected in the current share price.