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Nanoco closer to a quantum leap after two key deals

The supplier of specialist semiconductors has recruited two partners, validating its new strategy
October 11, 2016

Shares in Nanoco (NANO) slid more than 7 per cent after the maker of cadmium-free quantum dots revealed its operating loss (before share-based payments and the costs of moving to the main market) widened by a third to £12.5m in the reported period. But advances in production technology and a pair of licensing deals suggest investors may be missing the bigger picture.

IC TIP: Buy at 54.5p

Nanoco's low-power semiconductors can be used in liquid crystal displays (LCDs), lights, solar cells and bio-imaging equipment. Management eschewed short-term revenue when it made its deal with Dow Chemical non-exclusive in March, but has now signed licensing deals with German technology giant Merck and Taiwanese optical-film manufacturer Wah Hong, which promise to accelerate adoption of its technology.

Merck, which makes around 60 per cent of the liquid crystals used in LCDs worldwide, plans to build a mass production plant for Nanoco's dots. Wah Hong has already sent out samples to several large Asian display manufacturers. And innovations at Nanoco's Runcorn facility have significantly boosted production efficiency.

Ahead of these results, broker Canaccord Genuity expected an adjusted pre-tax loss of £1m for the year to July 2017, giving a loss per share of 0.4p, swinging to profits of £12m and 4.1p in FY2018 (from losses of £11.3m and 4.3p in FY2016).

 

NANOCO (NANO)
ORD PRICE:54.5pMARKET VALUE:£130m
TOUCH:53.8-54.5p12-MONTH HIGH:79pLOW: 35p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:8pNET CASH:£14.5m

Year to 31 JulTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20123.0-4.4-1.8nil
20133.9-5.0-2.0nil
20141.4-9.1-3.7nil
20152.0-10.9-4.1nil
20160.5-12.6-4.5nil
% change-77---