Thin Film Electronics — Update 21 February 2016

Thin Film Electronics — Update 21 February 2016

Thin Film Electronics

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Thin Film Electronics

New funding and mass-market moves

Three new partners

Tech hardware & equipment

22 February 2016

Price

NOK3.60

Market cap

NOK1,999m

US$/NOK8.5844

Net cash ($m) at 30 September 2015

24.6

Shares in issue
*Does not reflect planned share issue

555.4m*

Free float

76.9%

Code

THIN

Primary exchange

Oslo

Secondary exchange

OTCQX

Share price performance

%

1m

3m

12m

Abs

36.4

(5.0)

(51.8)

Rel (local)

33.5

8.8

(43.3)

52-week high/low

NOK8.0

NOK2.2

Business description

Thin Film Electronics (Thinfilm) commercialises printed electronics and owns key patents for printing rewritable, non-volatile memory and printable NFC circuits. It also licenses technology from others to develop complete printed systems.

Next event

Q415 results

26 February 2016

Analysts

Anna Bossong

+44 (0)20 3077 5737

Katherine Thompson

+44 (0)20 3077 5730

Thin Film Electronics is a research client of Edison Investment Research Limited

Thinfilm has secured $42m in new funding from Woodford, which has agreed to acquire 17.8% of the shares. The company has also announced two NFC OpenSense deals: an exclusive partnership to deliver the technology to clients of Arc, a shopper marketing agency within Leo Burnett, and a collaboration with Constantia Flexibles, a leading manufacturer of flexible packaging and labels. These deals further underpin our expectation of substantially increased order volumes for NFC OpenSense from H216, not only in security-conscious areas such as pharma and beverages, but also across the broader consumer spectrum. If realised, we see considerable upside potential for the earnings outlook and valuation, especially now that financing is assured for the year ahead.

Year
end

Revenue
($m)

PBT*
($m)

EPS*
(c)

DPS
(c)

EV/Sales
(x)

Yield
(%)

12/13

1.9

(10.4)

(2.5)

0.0

99.5

N/A

12/14

4.5

(24.2)

(4.9)

0.0

44.9

N/A

12/15e

4.0

(28.0)

(5.2)

0.0

54.9

N/A

12/16e**

13.2

(32.5)

(5.9)

0.0

20.0

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptionals and share-based payments. **Does not reflect proposed share issue.

Woodford deal a positive endorsement of Thinfilm

Woodford Investment Management will acquire 120m shares in a private placement at NOK3.00 per share, subject to EGM. As part of the share purchase consideration it will also acquire 40m warrants with an exercise price NOK4.50. We view the private placement to Woodford as positive in resolving Thinfilm’s funding needs for the next year and bringing in one of the best known and well-respected UK fund management houses as a shareholder.

Arc and Constantia are major influencers

We believe that both Arc and Constantia have the potential to facilitate substantial order flows for Thinfilm. Arc is a leading global specialist in in-store marketing, with Proctor & Gamble, Coca-Cola, MillerCoors and McDonald’s among its clients. Constantia, which has also placed a six-figure unit order, is the world’s fourth largest producer of flexible packaging with over 3,000 customers including top 10 global manufacturers in each of its fields of food, beverages and pharma. These include Diageo (already a THIN client), AB InBev, Unilever, GSK, J&J and Danone. Company statements indicate that Arc values NFC OpenSense primarily in terms of its consumer engagement benefits rather than its tamper-proof functionality.

Valuation: DCF potential growth

If Thinfilm can establish itself in the wider consumer products markets, we see significant potential to increase our sales forecasts from 2017 and to increase our DCF valuation, currently NOK6.69 (NOK6.02 after adjusting for the planned equity issue). Investor confidence should be increased by the funding security provided by the new equity issue and the presence of Woodford on the share register.

Exhibit 1: Financial summary

US$000s

2013

2014

2015e

2016e*

Year end December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,897

4,479

4,022

13,224

Cost of Sales

0

0

0

0

Gross Profit

1,897

4,479

4,022

13,224

EBITDA

 

 

(10,420)

(23,550)

(28,542)

(30,171)

Operating Profit (before amort. and except.)

 

 

(10,688)

(24,855)

(30,133)

(32,006)

Intangible Amortisation

0

0

0

0

Exceptionals

(2,154)

0

0

0

Share-based payments

(847)

(941)

(921)

(1,395)

Operating Profit

(13,689)

(25,796)

(31,054)

(33,401)

Net Interest

274

701

2,105

(507)

Profit Before Tax (norm)

 

 

(10,415)

(24,155)

(28,028)

(32,513)

Profit Before Tax (FRS 3)

 

 

(13,416)

(25,096)

(28,949)

(33,908)

Tax

0

0

0

0

Profit After Tax (norm)

(10,415)

(24,155)

(28,028)

(32,513)

Profit After Tax (FRS 3)

(13,416)

(25,096)

(28,949)

(33,908)

Average Number of Shares Outstanding (m)

412.7

493.5

535.4

555.4

EPS - normalised (c)

 

 

(2.5)

(4.9)

(5.2)

(5.9)

EPS - (IFRS) (c)

 

 

(3.3)

(5.1)

(5.4)

(6.1)

Dividend per share (c)

0.0

0.0

0.0

0.0

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

3,112

7,189

14,178

22,415

Intangible Assets

0

2,319

2,387

2,458

Tangible Assets

3,112

4,870

11,791

19,957

Investments

0

0

0

0

Current Assets

 

 

45,121

33,870

16,815

11,217

Stocks

0

451

611

2,502

Debtors

1,318

2,565

2,865

7,536

Cash

43,803

30,854

13,339

1,179

Other

0

0

0

0

Current Liabilities

 

 

(5,865)

(4,748)

(6,147)

(40,222)

Creditors

(5,865)

(4,748)

(6,147)

(8,222)

Short term borrowings

0

0

0

(32,000)

Long Term Liabilities

 

 

0

0

0

0

Long term borrowings

0

0

0

0

Other long term liabilities

0

0

0

0

Net Assets

 

 

42,367

36,311

24,846

(6,590)

CASH FLOW

Operating Cash Flow

 

 

(7,905)

(24,078)

(26,903)

(34,657)

Net Interest

234

569

570

570

Tax

0

0

0

0

Capex

(2,487)

(3,217)

(7,907)

(10,071)

Acquisitions/disposals

0

(2,700)

(674)

0

Financing

48,560

16,477

17,399

0

Dividends

0

0

0

0

Net Cash Flow

38,402

(12,949)

(17,515)

(44,159)

Opening net debt/(cash)

 

 

(5,401)

(43,803)

(30,854)

(13,339)

HP finance leases initiated

0

0

0

0

Other

0

0

0

0

Closing net debt/(cash)

 

 

(43,803)

(30,854)

(13,339)

30,821

Source: Thin Film, Edison Investment Research. Note: *Does not reflect planned share issue.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Gaming Realms — Update 18 February 2016

Gaming Realms

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