Edison Issues ADR Update on Thin Film Electronics (TFECY)

For Thinfilm (THIN), 2016 has been principally dominated by a steadily growing list of new client partnerships, preparations for the move to the new R2R plant and a successful $61.7m funding round. The restart of EAS orders in January adds to revenue security this year. THIN is also shortly to scale up go-to-market activities for the Smart ElastiTag solution with hang-tag specialist, Bedford Industries, including a joint marketing road-show. This is expected to accelerate new NFC product field trial numbers in 2017, helped also by the recent launch of THIN's cloud-based software portal CNECT. Earnings for 2016 were affected by higher than expected stockpiling costs and one-off FX losses, with no material impact on our forecasts. Our DCF valuation remains $9.70 per ADR.

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It is worth noting that our DCF valuation of $9.70 per ADR relies on THIN achieving a number of key milestones, in particular completion of the R2R plant for EAS production by end 2017 and NFC label production in Q318, and sufficient order inflows to attain sales of 2.0bn NFC labels in 2019. This in turn assumes falling label price points arising from substantially lower unit production costs.

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