Edison Issues Initiation ADR Update on Thin Film Electronics

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May 20, 2016, 07:47 ET

LONDON, May 20, 2016 /PRNewswire/ --

Thinfilm (THIN) has announced plans to commence R2R production by end-2017 and also plans to move to a larger plant in the US in 2017 to accommodate the line. We see the news as supportive of our $9.06/ADR DCF valuation because of the prospects for greater efficiencies from the new plant. Nevertheless, we expect THIN to have to further de-bottleneck its existing sheet-based plant in 2016/17 in order to meet product demand, particularly for NFC OpenSense. In addition, property lease costs are expected to rise in 2017 with the opening of the new facility, leading us to increase our cash burn forecasts for 2016 and 2017 by $13m. Thinfilm's Q116 earnings reflected the hiatus in EAS unit production in the first quarter, but were otherwise in line with expectations.

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We have increased our 2016 capex forecasts and reduced our 2017 earnings estimates to reflect the capex and opex impacts of the R2R plan. We believe that Thinfilm should be able to drive greater cost savings from the new plant and as a result have not revised our DCF valuation of $9.06 per ADR.

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Anna Bossong
Edison Investment Research
+44(0)20-3077-5737

Katherine Thompson
Edison Investment Research
+44(0)20-3077-5730

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