Thin Film Electronics ASA ADR (OTC:TFECY): Revenues from sales of NFC tags more than doubled during H118 as the number of clients and size of campaigns increased. However, Thinfilm’s management notes that the rate of increase in demand for NFC solutions during Q218 was more modest than previously anticipated and has delayed break-even to 2020. We revise our estimates and reduce our indicative valuation from NOK3.01/share to NOK1.92/share.
Delays in EAS ramp-up and R2R production
Total revenue and other income declined by $1.4m to $2.0m during H118, reflecting the absence of JDA income which benefited H117. Revenue from sales of EAS and NFC tags rose by 4% year-on-year to $0.8m, as although fewer EAS tags were shipped because of a delay in volume shipments for denim category use-cases, shipments of NFC tags more than doubled. Operating costs reduced by 5% year-on-year to US$27.2m. Operating losses widened by 9% to US$27.2m. Losses before tax narrowed by 2% to US$25.2m because of the beneficial impact of unrealised foreign currency gains. Net cash (excluding long-term financial leases) reduced by US$31.9m to US$66.2m. Thinfilm invested US$9.0m in fixed and intangible assets (including pre-payments) primarily related to equipment for the new roll-based production line at the San Jose site. Delays in installing all of the roll-to-roll (R2R) equipment for NFC manufacture will result in R2R production being postponed by up to several months.
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