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Nanoco awaits call from Korea

RESULTS: Nanoco is close to signing its first commercial deal, an important milestone that should generate both significant royalties and shareholder returns
October 14, 2013

Nanoco (NANO) is closer to realising significant income from its semiconductor nanoparticles - so-called 'quantum dots'. After signing a licensing deal with Dow Chemical in January, the Americans have said commercial production will begin in 2014's first half. Nanoco's chief executive, Michael Edelman, expects the first commercial contract - probably with the big Korean TV manufacturers - "soon". That could open the floodgates and put Nanoco on the map.

IC TIP: Buy at 159p

Indeed, about 15m large LCD televisions are sold every year, more than half by Korea's Samsung and LG. Each 60-inch TV will use one gramme of quantum dots, which will vastly improve its colours - there will be similar results for smartphones, tablets and computer screens, too. Revenue has already risen sharply after Dow paid Nanoco $1m (£0.63m) and various milestone payments were triggered in the Far East. But costs have, too, and £661,000 spent hiring another 16 mostly technical staff increased group losses.

But this investment should pay off. Liberum Capital expects an adjusted pre-tax loss of £7.6m in 2014, giving an adjusted loss per share of 3.1p (2013: £4.2m loss/1.7p loss per share). But in 2015, following a full-year of production, the broker expects a £3.5m pre-tax profit and EPS of 1.5p, rising to 13.9p the year after and 35.5p in 2017. LED lighting projects, high-tech solar film and cancer imaging are also likely to make big contributions further down the line.

NANOCO (NANO)

ORD PRICE:159pMARKET VALUE:£334m
TOUCH:158-160p12-MONTH HIGH:199pLOW: 56p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE: 7pNET CASH:£9.9m

Year to 31 JulTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20091.99-0.78-0.31nil
20102.94-1.37-0.60nil
20112.64-3.22-1.30nil
20122.95-4.35-1.80nil
20133.93-5.04-2.00nil
% change+33---