Thin Film

Published January 8th, 2015:

Thin Film Electronics ASA

Every once in a while we get promising tipps from our readers. Thin Film Electronics is such a tipp, which we have started to look at in early December. The timing has shown to be rather interesting since December was a pretty active month for the company.

Thinfilm (Ticker: THIN) is a Norwegian company and leader in the development of printed electronics. It incorporates intelligence into high-volume disposable items using IP developed internally and licensed from partners. Products include temperature sensors, timer labels and NFC tags. More info on the company’s website:

Here is a short movie provided by Thin Film:

We have come across the work done by Edison Investment Research , who cover Thin Film Electronics and regularly provide updates.

Here’s what Edison had to say about recent developments in a comment from January 7th, 2015:

Fortune 250 licensing agreement
The licence agreement was signed with “a global leader in functional printing” on 29 December 2014. This was one of the main goals for the year and one of the key sensitivities that we had identified in our forecasts. The licence agreement means the partner will invest in manufacturing capacity and product marketing and Thinfilm will receive royalties on product sales. At the moment the agreement applies just to Thinfilm Memory products but has the potential to be expanded into other product areas.

Distribution agreement with CymMetrik
CymMetrik has been operating for over 40 years and provides label printing technologies across multiple industries including pharmaceuticals and healthcare, food and beverage and personal care. It has over 5,000 employees and ships over 12bn labels a year. Although the agreement does not yet constitute a product order, it puts in place an important distribution channel to take advantage of the significant ASEAN market. Visibility is very limited at this stage but integrating its products into just a fraction of the 12bn labels that CymMetrik produces annually could contribute materially to Thinfilm’s revenue.

Global Factories new blister packaging system
Global Factories is a private company based in the Netherlands and is planning to release a new pharmaceutical packaging machine in Q115 that will use blister packaging to automatically package combinations of medicines for patient use. Thinfilm’s memory products will be used to ensure that the blister packaging used by the machine is authentic. Initially its memory product will be applied to the blister packaging at the box level and the packaging machine will contain an ASIC (application specific integration circuit) to test authenticity. With this level of application management expects the volume of labels used to be around 10m but there is potential for the labels to be applied at the package level, thereby increasing the volume of units used by a factor of 10.

Claus Hansen: New head of sales in Asia
Thinfilm has further boosted its sales and marketing team through the hire of Claus Hansen to head up the sales effort in Asia. Before this Claus was a senior director in the identification ASIA division of NXP Semiconductors and was responsible for driving the adoption of NFC. During his tenure (2009 and 2013), NXP Asia sales grew from US$120m to U$700m. Developing NFC and internet of things applications within Asia at a time when NFC was still relatively new should provide valuable experience when trying to develop the printed NFC and smart labels that Thinfilm is developing.”

When it comes to valuation and target price, Edison Investment Research is very upbeat on Thin Film. They write as follows: ”
Finding a licensing partner was one of our key sensitivities so signing this agreement with the Fortune 250 company is a significant step forward and reduces some of the uncertainty around the viability of the business model. The licensing agreement terms, specifically the share of revenue that Thinfilm will receive, are now the key sensitivity and will be an important indicator of the potential margins and share valuation that can be achieved. The terms of each licensing agreement will vary by application so we view a sensitivity analysis of margins and revenue growth as key to determining a valuation but our base case remains unchanged at NOK16.78.”

The base case target price of NOK 16.8 can be compared to the NOK 4.80 at which Thin Film is currently trading at. We have yet to finish our own model and valuation but we are willing to take some risk and piggy back Edison on their call. The “Internet of Everything” is hot right now and Thin Film Electronics seems a good way to play this trend.

Nordic Investor

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