$22m raised for production expansion
Thin Film Electronics ASA (OSLO:THIN) has raised $22m from US investors in a private placement priced at NOK5.01/share. The funds will be used for the expansion of production facilities following strong interest in the newly-launched NFC OpenSense platform. Management expects the resulting total capacity to be capable of generating $40m of revenues at 50% gross margin by the end of 2016. No volume orders have been announced for OpenSense yet, so the rate of production ramp-up is difficult to predict, but we expect the new capacity to become fully utilised over the next 12-18 months.
Multiple 50->100m unit opportunities
Management reports multiple-hundred-million unit sales opportunities in the spirits, tobacco and cosmetics industries with a unit price between $0.30 and $0.50. The current line has capacity for 28 million OpenSense units at 27% gross margin and $17.5m of the funds raised from this placing will be used to upgrade the line to achieve capacity of 120 million units at 50% margins. This will be carried out in several steps and management expects to see the first capacity increases six months from now. The remainder of the funds will go towards operating expenditures. The line can be used for Electronic Article Surveillance (EAS), OpenSense and Smart Labels, but unit capacity varies for each product since they have different processes and circuit footprint.
Forecasts unchanged but boost to mid-term earnings
As part of the transaction, 17 million warrants with an exercise price of NOK6.10 and a three-year expiry were issued to investors. We have updated our forecasts to reflect the new capital expenditure and fund-raising, but our revenue and operating cost forecasts remain unchanged apart from marginally higher depreciation as a result of the increased value of assets. Medium term, beyond our forecast period, the additional capacity will mean a larger proportion of labels are produced internally; therefore, revenue and profit will be incrementally higher than if produced externally.
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