Lamor - Environmental Solutions Products and Services

Stocks
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This time, too, it’s about financing growth: Lamor Corporation Plc, specializing in environmental clean-up and solutions, announced on Thursday that it plans an initial public offering of approximately 30 million euros.

It could be listed on the First North Premier marketplace as early as 2021.

Growth expectations are dizzying, as Lamor’s order book value was 228 million euros at the end of September. In September 2020, the order book was 24 million euros, so it can be described as explosive growth.

“The surge in growth has been so enormous,” explains CEO Mika Pirneskoski, justifying the offering and listing.

“Such strong growth in the order book means that we need to strengthen our already strong balance sheet.”

Lamor states that it has won major service contracts in 2020 and 2021:

In Kuwait, it is cleaning soil contaminated by oil spills from the Persian Gulf War, in Saudi Arabia, it is supplying oil spill response equipment and services, and in Guyana, it is building a waste management system for Exxon.

The Danske Invest Suomi Osake fund, Pension Insurance Company Veritas, Mandatum Asset Management Oy, and funds managed by SP-Rahastoyhtiö Oy are participating in the offering.

Anchor investors’ commitments total 19.5 million euros. Lamor’s market value is expected to be 95 million euros.

Lamor, which is making the world a cleaner place, could achieve a revenue of one hundred million euros very quickly.

From January to September 2021, Lamor generated an adjusted EBITDA of 4.7 million euros on a revenue of 35.2 million euros. The operating profit for the nine months was 1.4 million euros.

For 2022, it has an order book of approximately 76 million euros.

From this, one can consider how quickly the company could reach a revenue of one hundred million euros. Much depends on how Lamor converts its significantly grown order book into profits.

Its goal is an adjusted EBITDA of over 16 percent and an adjusted operating profit of over 14 percent. The company seeks a strong balance sheet and aims to distribute annual dividends.

Lamor’s earnings history includes poor periods: most recently, it recorded a slight operating loss in 2018, and in the financial crisis conditions of 2009, the operating loss was 7.0 million euros.

However, the tide has turned. The company’s current gross margins are good, and its targets are high.

“Our goal is to be the leading company providing comprehensive environmental solutions. Already, our broad offering and global network support the implementation of demanding projects,” Pirneskoski states.

The company’s website:

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The Kuwait order is the largest in the company’s history and will be carried out through a local joint venture in which Lamor owns 45%. It would be interesting to hear how the other 55% ownership is distributed. Is there only one vocal main owner or several smaller ones, which would make Lamor the main owner?

All in all, this is an interesting listing. Where can I find the money for this?

E: Apparently, the other owner of the Kuwaiti joint venture is called Khaled Ali Al-Kharafi and Brothers. And there seem to be no other owners. http://tradearabia.com/touch/article/CONS/382819

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This listing definitely sparks my interest as well. In my work, I’ve had the opportunity to learn a fair bit about oil spill response, especially preparedness for marine oil spills. Lamor is the only product I know by name. They supply vessel collection systems and containment booms (so-called “floating fences” that oil cannot penetrate) for oil spills in waterways. Fortunately, marine oil spills are not common in Finland, but there is still extensive preparedness. And that preparedness is massive. So, even if the products are never used, business still thrives. Oil booms don’t last forever in storage, so older stock must be replaced annually. In Finland, the Border Guard is responsible for marine oil spill response, and rescue departments handle coastal areas. In inland waterways, rescue departments also prepare for oil spill response with booms and collection systems. Ports and companies that handle oil products also need to prepare.

The reasons why this listing interests me are as follows: 1. Market leader, 2. Customers are states, agencies, authorities, large companies, etc., with seemingly bottomless treasuries, 3. Customers are “forced” to acquire and update equipment even if it’s never needed, 4. In the event of a spill, cleanup costs are covered by the polluter (insurance company), and the response authority decides the scale of the operations, 5. Investing in environmental protection is fashionable, 6. The principle in oil spill response is that “oil washed ashore is a thousand times more expensive to collect than oil in the sea.” This supports the importance of preparedness. 7. Combining products from different manufacturers is, to my understanding, possible, but updating inventory naturally gravitates towards products from the same manufacturer.

Concerning points: 1. Profitability, I can’t analyze the numbers. Can market leadership translate into profitability? 2. Is recycling outdated equipment possible/profitable? 3. Is the national preparedness fund in good order?

This is just some pondering based on my own perception of Lamor’s products. A more detailed analysis would require at least a yellow belt fighter! :grinning_face_with_smiling_eyes:

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Yes, it would be nice to find funds for this offering. :+1:t3:

From what I’ve experienced with their GTA pumps, they are indeed quality games and well-known in their field. No competing brand immediately comes to mind, although there are others. And if the growth prospects are really that strong, the future looks good. An operating profit margin of 10-15% is already very good in my opinion, especially if it can be maintained at that level after growth…

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There seems to be enough growth expectations. Revenue more than doubled “on a fast schedule”. The order book is 5X compared to current revenue. In addition, Lamor’s website has an article from the end of 2020 on the ecosystem economy, where the revenue target is over a billion. What is Lamor’s share in this ecosystem economy, who knows?

Does anyone else think Lamor’s EBITDA percentage is low? The company seems to be some kind of “star as a global cleaner”, so why no premium margins?

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Here is an interview by Verneri (20min):

Video topics-
00:00 CEO Introduction
01:20 What does Lamor do, in simple terms?
04:30 Offerings
06:20 Business size and profitability
09:05 Where the company name comes from
09:10 Market: key trends, guess on size? Growth rate?
12:10 Lamor’s competitive advantages in their own opinion?
15:08 Strategy
17:30 Goals
17:40 Project risks
19:15 Why are you planning to list and what will the proceeds be used for?

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This now has its own company page too :slight_smile: Lamor - osake - Inderes

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The company has been in the market for 40 years and is one of the leaders in its field. The market size is 30 billion euros, and last year’s revenue was 45 million. Is the market that fragmented, or why doesn’t a leading company have a bigger piece of the pie?

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In the Inderes interview, I believe the CEO addressed this. The same business includes companies that mainly clean up messes, their equipment primarily consists of excavators, trucks, etc. Many of these are probably significantly large. Lamor, on the other hand, aims to take control of the entire processing chain, not just cleaning up messes.

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New shares are offered in a public and institutional offering at a subscription price of 4.83 euros per share

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I tried to edit the message but it wasn’t saved because the bank security was activated in the browser…

Danske Bank acts as the lead manager for the planned Initial Public Offering (" Lead Manager ").

Important dates

25.11.2021 at 10:00

Subscription period for the Public Offering, Institutional Offering and Personnel Offering is expected to commence

2.12.2021 at 16:00

Subscription periods for the Public Offering and Personnel Offering end

7.12.2021 at 11:00

Subscription period for the Institutional Offering ends

Approximately 7.12.2021

The final result of the Initial Public Offering is announced

Approximately 8.12.2021

Offered Shares subscribed for in the Public Offering and Personnel Offering are registered in investors’ book-entry accounts

Approximately 8.12.2021

Trading in shares on First North Premier is expected to commence

Approximately 10.12.2021

Offered Shares allocated in the Institutional Offering are ready for delivery against payment via Euroclear Finland

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It’s going to be a tight squeeze to make the subscription, as the liquid funds are tied up in the Norrhydro (Norrhydron) offering until December 1st. :grin: Hopefully, the offering won’t be interrupted before December 2nd. :thinking:

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The materials do not mention a possible earlier interruption of the subscription period; such has practically always been the case if the subscription could be interrupted before the announced end time. I therefore interpret that Lamor’s public offering subscription period cannot be interrupted before 2.12. at 4:00 PM.

A useful, comprehensive link:

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Lamor has submitted the Finnish prospectus (" Prospectus ") regarding the Initial Public Offering for approval to the Finnish Financial Supervisory Authority (Finanssivalvonta). The Finnish Financial Supervisory Authority is expected to approve the Prospectus on or about 24 November 2021. The Prospectus will be available no later than 25 November 2021 before the start of the subscription period on Lamor’s website at sijoittajat.lamor.com/listautuminen, Danske Bank’s website at www.danskebank.fi/lamor and Nordnet Bank AB’s website at www.nordnet.fi/fi/lamor. The English language document of the Prospectus will be available on or about 25 November 2021 on the following websites: investors.lamor.com/ipo and www.danskebank.fi/lamor-en.

That could be mentioned there, but I haven’t found the prospectus anywhere yet.

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What do you think about the valuation? Does it seem high with the current revenue and profit?

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It’s difficult to assess the valuation because the company is on the verge of a huge growth spurt, and it’s quite uncertain how much of that massive order book will translate into profit.

From a valuation perspective, I always see it as a positive sign when an employee offering is arranged in connection with the IPO. Yes, employees always get to subscribe at a slightly lower price than the general public, but it usually indicates that the valuation can’t be too excessive, because employees (who are well-informed about the company’s affairs) wouldn’t subscribe then, of course.

I’m still interested.

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Yeah, the valuation didn’t seem bad to me either, considering that Lamor is one of the few companies in the world that does this on a “large scale” and the order book is almost 10 times what it was in 2020 :grin: My biggest worry is where I’m going to get the money for the issue :joy:

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This is a genuinely interesting company and offering in every respect. What I think is also essential is how sustainable the growth is. Has it just happened that a few new big orders have come in, or are even bigger orders expected in the future?

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Additionally, it would be good to get an answer as to whether, for example, the Kuwaiti 300 million order has already been included in the 2021 order backlog value in some way. The order backlog has grown from 23.8 to 228 MEUR, so I somewhat suspect this has been done to some extent. Here are a few things I would hope others attending tomorrow’s company presentation would inquire about, as I probably won’t be able to participate except by listening due to other commitments:

  • How capital-intensive is Lamor’s operation? Do costs scale with operations, or do fixed costs, e.g., for equipment, increase as operations expand?
  • The operating profit margin is quite small. Is this currently due to equipment costs, and does the company intend to increase the operating profit margin in the future by some means? (What might these means be?)
  • How much debt does the company currently have, and in what form is it (bank loans, loans from private equity investors, etc.)? In my opinion, this is quite a relevant question now that interest rate hikes are frequently hinted at.
  • Does the company intend to launch new solutions for combating environmental damage/water purification in the future, or is the intention merely to grow current operational activities?

This case is really difficult to evaluate partly because there don’t seem to be other similar companies on the stock exchange, so it would be good to get answers to at least these questions :smiley:

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An excerpt from a five-year-old HS article about Lamor:

“The equipment business’s revenue varies annually between 40-60 million euros, depending on the number and size of oil spills. The global service network’s revenue is approximately 100 million euros.”

This year, the company’s January-September revenue was 35.2 million euros. Oil spill response is the company’s core business, and it is the world market leader in this field by a significant margin. However, in five years, revenue has shrunk significantly, even though the order book is currently apparently high.

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