A mixed picture for Nanoco
15th August 2018 14:45
by Graeme Evans from interactive investor
It's been a long haul for technology stock Nanoco, with today's trading update offering a mixed picture for investors. Graeme Evans reports.
Even though investor excitement around the technology stock Nanoco has long since dimmed, the company hasn't given up trying to convince markets about its longer-term prospects.
Those efforts saw it offer some welcome clarity today on a contract with an unnamed major US partner, leading it to declare that it had started the new financial year with "considerable confidence". On the downside, however, updated revenues guidance for 2018 caused shares to fall 11%.
The current price of just above 40p is a far cry from 2013, when the stock was trading near to 200p amid optimism about demand for its cadmium-free quantum dots.
These provide much better brightness, colour and power efficiency than ordinary LED technology, making them a must-have for the big electronics manufacturers. Dow Chemical is a partner of the company, with a licence to manufacture, market and sell Nanoco's quantum dots.
Despite downgrading forecasts for 2018, analysts at Peel Hunt drew comfort from today's disclosure that the company had booked revenues of up to £2.5 million in the 2018 year from a first agreement with the unnamed US partner.
Peel Hunt said:
"This demonstrates the increasing strength and trust within the relationship, although revenue recognition continues to hold back some of the top line."
Manufacturing facilities in Runcorn are being developed and the commercial ramp-up is expected in the second half of the 2019 calendar year, when Peel Hunt predicts "the true scale of the relationship" will be realised.
The broker, which has a target price of 67p, said it was also encouraging that the company's cash position has improved by £2 million to £10.7 million over the last six months.
The analysts added: "We see no change in the core investment case although it has become slightly longer dated.
"We now have some real clarity on the near-term financials and this shows the positive progress that has been made between Nanoco and its customers."
However, Peel Hunt noted that losses for the 2018 financial year are now forecast to be higher than expected at £7.3 million, with £5.6 million predicted for the year after.
In today's pre-close update, chief executive Michael Edelman said the second half of 2018 had been "transformational" with progress also seen in display and lighting as the first commercial products are expected later this calendar year.
He added:
"Our cash position has improved since last reporting and we start the new financial year with considerable confidence."
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