Lumenpulse’s (TSX:LMP) second acquisition won’t have a huge immediate impact on its balance sheet, but it does put the company on “firmer competitive footing”, says Euro Pacific Canada analyst Andrej Krneta.
Yesterday, Lumenpulse announced it had acquired Quebec City-based chip supplier Ariane Controls for an undisclosed cash amount.
“With a record of developing and implementing successful solutions as a Lumenpulse partner, we are excited to welcome the Ariane team into our company,” said CEO Francois-Xavier Souvay. “Ariane’s founder and CEO, Jean-Pierre Fournier, will play a strategic role supporting the fast-growing adoption of our Lumentalk technology, which will further develop its full market potential. His staff will join our research and development team, and enrich our know-how in hardware, firmware and software development.”
Krneta says Ariane’s low bit rate and single carrier modulation will make Lumenpulse’s products more power efficient. He also thinks the company’s error detection techniques will make the resulting product less susceptible to the noisy channel of power lines. While he doesn’t see a material financial impact from the pickup, he does think Lumenpulse will recoup some of the cost in savings from licensing fees paid to Ariane, which it has done substantial business with.
“With Specifiers (engineers, architects) as end customers, we see high-performance solutions driving the end market adoption and as a result firmer competitive positioning in the distribution channel (Agents). Today’s acquisition confirms our thesis on LMP and the wider LED lighting space: high-performance control systems are a key source of competitive advantage in the maturing LED lighting market,” said Krneta.
In a research update to clients yesterday, Krneta maintained his “Buy” rating and $20.00 one-year target on Lumenpulse, implying a return of 23.1% at the time of publication.