Thin Film Electronics: Destocking Holds Back Revenue Development
Edison | Nov 21, 2018 12:45AM ET
Thin Film Electronics ASA (LON:0JI9) results for the nine months ended September 2018 show that Q318 was adversely affected by the end-customer destocking of the anti-theft (EAS) tags. We therefore revise our estimates downwards and cut our indicative valuation from NOK1.92/share to NOK1.68p/share. However, we are encouraged that Apple (NASDAQ:AAPL) recently launched iPhones with native background, NFC tag read functionality. This is generating renewed interest among brand owners for Thinfilm’s NFC solutions, underpinning management’s expectations of a strong NFC tag ramp-up during H219.
Revenue development held back by destocking
Revenues from sales of EAS, NFC and CNECT products declined by 24% y-o-y during the nine months ended September 2018 to $1.1m. 12.3m EAS tags were shipped compared to 23.7m in Q317, as a result of inventory destocking by the fast-fashion end-customer. Shipments of NFC tags rose by 26%. Operating costs (excluding depreciation and amortisation) reduced by 6% y-o-y while operating losses were broadly unchanged at US$41.0m. After investing US$12.0m in capex, primarily for the new roll-to-roll (R2R) production facility, net cash fell by US$50.0m to US$48.1m. Noting that deployment of NFC tags on-package has been slower than anticipated, management has delayed cash break-even until during FY20 and is in discussions with a strategic equity partner regarding future funding requirements. We model a $60m funding gap.
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Thin Film Electronics: Destocking Holds Back Revenue Development
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