Deep Dive into a Leading Provider of Nanotechnology Solutions in Asia

Listed on the Mainboard of Singapore Exchange on 30 October 2020, Nanofilm Technologies International Limited (“Nanofilm”) is a leading provider of nanotechnology solutions in Asia, leveraging its proprietary technologies, core competencies in R&D, engineering and production, to provide technology-based solutions across a wide range of industries.

Nanofilm’s solutions serve as key catalysts in enabling its customers to achieve high value-add advancements in their end-products in an environmentally sustainable manner.

Key Statistics

Latest 1H FY2021 Financial Result

Source: Nanofilm 1H FY2021 Result Press Release

For 1H FY2021, Nanofilm’s revenue grew by 24.2% year-on-year to S$96.6 million. The growth is led by the Group’s Advanced Materials Business Unit (“AMBU”) and Industrial Equipment Business Unit (“IEBU”).

Despite the topline growth, Nanofilm’s net profit after tax suffered a decline of 2.3% year-on-year to S$18.1 million. The trend was mainly dragged down by the increased start-up expenses related to the Group’s new Shanghai Plant 2 and equipment qualification costs, as well as New Product Introduction (“NPI”) projects.

As a result of the increase in operating costs, Nanofilm’s PAT margin dropped by 5.1 percentage points to 18.7%.

Share Buyback

Shortly after the release of its 1H FY2021 result on 13 August 2021, Nanofilm has conducted a series of share buybacks to stabilize its share price. On 16 August 2021, Nanofilm bought back 1.55 million shares at a price range of between S$4.21 and S$4.52. The transaction value amounted to S$6.76 million.

Subsequently, Nanofilm bought back another 3.36 million shares at a price range of between S$3.81 and S$4.07, to further stabilize its share price.

The latest share buyback transaction occurred on 14 October 2021, where the Group bought back 300,000 shares at a price range of between S$3.68 and S$3.76. The transaction value came in at S$1.11 million.

Consensus Estimates

Based on the analyst consensus estimates, Nanofilm has a “Hold” recommendation with a mean target price of S$4.16. This translates into a potential upside of 10.27% based on the share price of S$3.78.

Over the 3 months, analysts have slashed their target price by more than 33% and has downgraded their forecasted revenue and profitability by 15.5% and 27.1% respectively. This shows that analysts are slightly bearish on the company’s outlook.

Latest Corporate Development

Appointment of Chief Executive Officer - In conjunction with Nanofilm’s 3Q FY2021 Business Update, the Group has announced that its current Deputy Chief Executive Officer (“CEO”) and Chief Commercial Officer (“CCO”), Mr. Gary Ho, will be appointed as Group CEO with effect from 1 January 2022.

Previously in his capacity as Deputy CEO, he provides strategic and operational guidance to its Business Units. As CCO, he leads the Group’s business development efforts to cultivate business opportunities in new market segments and deepen relationships with existing customers.

Finally, Mr. Ho remarked: “It is an honour to take on this leadership role for Nanofilm together with our Founder and Executive Chairman Dr Shi Xu. My aim is to drive the development of our business units as we find new and exciting avenues for the commercialisation of our deep technology capabilities. The potential applications of our technologies span numerous industries and I look forward to see these come into fruition in the years to come.”

Sydrogen Energy Ptd Ltd - Sydrogen, which is a joint venture between Venezio Investments Pte Ltd1 and Nanofilm, was completed on 1 October 2021 and has already commenced work in Shanghai and Singapore. Nanofilm has highlighted that Sydrogen is commissioning and installing its initial pilot production line at Nanofilm’s Shanghai Plant 2 for customer qualification in an automotive project involving a key component for a hydrogen fuel cell stack.

Given Hydrogen is becoming a viable alternative energy source in China, this latest development should help Nanofilm to capture market share in the country’s Hydrogen market.

Finally, Nanofilm expects Sydrogen is working towards a maiden revenue contribution to the Group in FY2022.

1An indirect wholly‐owned subsidiary of Temasek Holdings (Private) Limited

Technical Analysis for Nanofilm

Since its IPO on 30 October 2020, Nanofilm’s share price has been on an uptrend, as seen from the above weekly chart. In July 2021, with its share price trading above the upper limit of the Bollinger band, this resulted in profit taking, which accompanied by low volume traded across the week.

However, the profit taking took a turn for the worse as its share price faced a strong sell down in mid-august, with high volume and a big gap down. This was mainly due to the unexpected drop in earnings, which missed analysts' estimates by a wide margin.

Its share price recovered the following week with a series of share buybacks set to stabilize the share price’s fluctuation. Despite that, its share price continued the downward trend, as seen from the MACD line, trading below the zero line.

Since then, its share price has been trading at a tight range of S$3.70 and S$3.79. With RSI hovering around the mid 30s level, there could be a potential technical rebound for Nanofilm’s share price.

Conclusion & Management Outlook

To conclude, Nanofilm’s latest financial performance painted a mixed picture with top-line growth but big decline in its bottom line due to the higher relevant costs involved.

On this note, analysts have slashed their forecasted figures and target price for Nanofilm. Despite the recent negativity, the CEO appointment and series of share buybacks may help stabilize its share price in the near term.

In terms of management outlook, Nanofilm mentioned that it will continue to leverage its core technologies on mission critical applications in new end-markets that offer favourable secular growth trends and seek to tap strategic value chain partners to accelerate market penetration in these markets.

Finally, the Group will proactively seek potential synergistic acquisitions and strategic partnership, unlocking value through the Group’s core technologies and platform.

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