Edison Issues ADR Research Update on Thin Film Electronics

Nov 30, 2015, 11:37 ET from Edison Investment Research

LONDON, November 30, 2015 /PRNewswire/ --

Thinfilm has reported Q315 results showing a 3.5% q-o-q decline in revenues and a 19.3% q-o-q increase in operating losses, mainly due to lumpy grant revenues and rising external development costs resulting from the ramp-up of production capacity. The key milestones during the quarter were Xerox's announcement of the launch of Thinfilm labels, the placing of a pilot order by Diageo, and Ypsomed announcing its intention to use NFC OpenSense in autoinjectables. We see the potential for news of further new order inflows, progress in capacity expansion and in product development to further increase interest in the stock in coming quarters.

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Thinfilm has shown the ability to enter into licensing (Xerox) and large-scale sales agreements (Nedap), and has a very prospective pipeline (Diageo, Ypsomed, Australian wines). We see the main driver of value for the company as its ability to monetise these developments and its promising portfolio of technologies. Our DCF model gives rise to a valuation of $7.75 per ADR (previously $10.38). This is based on our forecast 76% CAGR in revenue to 2025, a terminal EBITDA margin of 28% (peak of 34% in 2020), terminal EBITDA growth of 3% and a WACC of 15%.

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SOURCE Edison Investment Research