Positive tie up with InterDigital, but FY13e down
In line with its August update, DDD’s (DDDGF) FY13 interims show revenue down 42% at $2.4m (H112: $4.0m), affected by the continuing slowdown in global PC sales, which has affected the 3D PC market. As intimated last month, we now reduce our FY13e for revenue to $5.0m (from $11.0m). While the group is maintaining tight control of operating expenses, we now estimate an FY13e normalised $1.2m pre-tax loss (from $3.4m profit). Our initiated FY14e anticipates a recovery to pre-tax break-even. The strategic £0.57m investment from and development agreement with InterDigital has the potential to add to the group’s growth prospects in the medium term.
H113 revenue drop; FY13 estimate cut
During H113, 3D TV shipments of the group’s TriDef 2D to 3D conversion solutions grew 16% to 6.44m units (H112: 5.56m) with Samsung representing the majority, while shipments in the PC market (nine active licensees) declined 76% to 0.26m units (H112: c 1.1m). The 42 % drop in H113 revenues, reflects the higher per unit royalty in the PC market. In response to this continued decline in the PC market, DDD reduced headcount by c 15% in H113 and is maintaining tight control on operating expenses. We initiate an FY14 estimate, which incorporates increased royalty revenue from further growth in TV, a first meaningful contribution from tablets and some recovery in PC. We anticipate pre-tax break-even, although EPS is likely to be continued to be affected by foreign royalty withholding taxes.
InterDigital: Development agreement/cash injection
On 17 September, DDD announced that it has signed a one year joint development agreement with InterDigital (NASDAQ: IDCC) to explore the feasibility of combining DDD’s latest 2D video image processing techniques with InterDigital’s user adaptive video streaming technology for applications in streaming video to mobile devices and Smart TVs. Simultaneously, InterDigital has taken a 4.9% stake in DDD via a 7m share placing at 8.175p raising £0.57m , the proceeds of which will allow DDD to continue to develop its HD and Ultra HD video processing technologies.
Valuation: Leading 3D player awaiting return to profit
The fall in the share price this year appears to reflect the current weakness in the PC market. We do not believe this should affect long-term growth for the group, with the potential addition of more 3D tablet licences boosting royalty revenues in the medium term. DDD is established as a strong leader in 2D to 3D conversion across multiple display segments, and the group should be able to participate fully in the growth of the 3D market.
To Read the Entire Report Please Click on the pdf File Below.
In line with its August update, DDD’s (DDDGF) FY13 interims show revenue down 42% at $2.4m (H112: $4.0m), affected by the continuing slowdown in global PC sales, which has affected the 3D PC market. As intimated last month, we now reduce our FY13e for revenue to $5.0m (from $11.0m). While the group is maintaining tight control of operating expenses, we now estimate an FY13e normalised $1.2m pre-tax loss (from $3.4m profit). Our initiated FY14e anticipates a recovery to pre-tax break-even. The strategic £0.57m investment from and development agreement with InterDigital has the potential to add to the group’s growth prospects in the medium term.
H113 revenue drop; FY13 estimate cut
During H113, 3D TV shipments of the group’s TriDef 2D to 3D conversion solutions grew 16% to 6.44m units (H112: 5.56m) with Samsung representing the majority, while shipments in the PC market (nine active licensees) declined 76% to 0.26m units (H112: c 1.1m). The 42 % drop in H113 revenues, reflects the higher per unit royalty in the PC market. In response to this continued decline in the PC market, DDD reduced headcount by c 15% in H113 and is maintaining tight control on operating expenses. We initiate an FY14 estimate, which incorporates increased royalty revenue from further growth in TV, a first meaningful contribution from tablets and some recovery in PC. We anticipate pre-tax break-even, although EPS is likely to be continued to be affected by foreign royalty withholding taxes.
InterDigital: Development agreement/cash injection
On 17 September, DDD announced that it has signed a one year joint development agreement with InterDigital (NASDAQ: IDCC) to explore the feasibility of combining DDD’s latest 2D video image processing techniques with InterDigital’s user adaptive video streaming technology for applications in streaming video to mobile devices and Smart TVs. Simultaneously, InterDigital has taken a 4.9% stake in DDD via a 7m share placing at 8.175p raising £0.57m , the proceeds of which will allow DDD to continue to develop its HD and Ultra HD video processing technologies.
Valuation: Leading 3D player awaiting return to profit
The fall in the share price this year appears to reflect the current weakness in the PC market. We do not believe this should affect long-term growth for the group, with the potential addition of more 3D tablet licences boosting royalty revenues in the medium term. DDD is established as a strong leader in 2D to 3D conversion across multiple display segments, and the group should be able to participate fully in the growth of the 3D market.
To Read the Entire Report Please Click on the pdf File Below.