NANOFILM TECHNOLOGIES INTL LTD (SGX:MZH)
NanoFilm Technologies - Multiple Growth Drivers
Investment case: highly differentiated technology
- NanoFilm Technologies (SGX:MZH) is currently the only company globally to offer filter cathodic vacuum arc (FCVA) coating technology. Nanofilm’s FCVA technology is highly differentiated as it allows coating to be done in room temperature across substrates such as ceramics and plastics, contrasting traditional methods like PVD, which requires higher temperatures.
- In turn, this has enabled the products of its blue-chip customers to achieve enhanced aesthetics and functionality. As such, we see NanoFilm Technologies’ prospects leveraged to long-term growth prospects of 3C (computer, communication and consumer electronics), automotive, and even in other new markets.
Catalysts: leveraged to several megatrends
- As FCVA can be done at room temperature, it is not just more economical, but also environmentally friendlier. FCVA is used to make products last longer and more aesthetically pleasing and resilient – in turn allowing blue-chip customers to make their products more premium. NanoFilm Technologies currently has around 50 patents, with another 20 pending applications. NanoFilm Technologies is usually the sole supplier for its offerings, and customer relationships are sticky due to the lack of alternatives.
- NanoFilm Technologies’ technology is industry agnostic so it can be applied across 3C, automotive, new energy, biomedical, and the optical lens and sensors industry. As such, this opens up opportunities for NanoFilm Technologies to ride megatrends in 5G, smart vehicles, and nanotech in medical implants and devices.
Valuations: scarcity premium
- NanoFilm's share price is trading at 40.9x consensus FY21E P/E. This is a premium to SG-listed technology stocks at 15x FY21E P/E. Separately, advanced materials peers are trading at 30.8x FY21E P/E. We believe NanoFilm Technologies’ high P/E is due to scarcity premium.
Risks: customer concentration and competition
- We see revenue concentration from Customer Z (56.5% of 1H20 revenue), a global consumer technology company, as a key risk. Other risks include competition from new and alternative solutions and the ability of NanoFilm Technologies to assert its IP rights.
- NanoFilm Technologies may also be indirectly affected by components shortages in the supply chains that it is exposed to.
- See
- NanoFilm Technologies (SGX:MZH) is one of the participating companies of Invest ASEAN 2021 by Maybank Kim Eng.
Gene Lih Lai CFA
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2021-06-21
SGX Stock
Analyst Report
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