Edison Issues ADR Update on Thin Film Electronics (TFECY)

LONDON, UK / ACCESSWIRE / December 21, 2016 / Thin Film Electronics (Thinfilm) (OTCQX: TFECY) has announced a private placement to raise NOK529m ($62.6m) at an issue price of NOK3.91 per share. The funds are to be used to prepare and equip the new roll-to-roll facility in San Jose, as well as to cover operating costs in 2017 and 2018. Based on revised model assumptions, we estimate they should be sufficient to bridge all but $21m of Thinfilm’s future cash requirements ahead of it becoming free cash flow generative in 2019. As such, we expect this issue to greatly reduce investor concerns about future funding needs and potential further equity dilution. Adjusting for the increase in the number of shares, we have revised our DCF valuation by 5% from $10.40 to $9.70 per ADR.

With changes to our forecast cash flows, arising from our more conservative take on the rate of growth of NFC-enabled label capacity in 2018 and 2019, our DCF valuation has fallen to $9.70 per ADR (from $10.40) to reflect the dilutive effect of the equity issue and earnings revisions. The impact of this revision and the 19.8% increase in ADRs in issue is largely offset in our model by a reduction in the WACC from 15.0% to 14.5%. This reflects what we see as the substantial reduction in the perception of funding and future equity dilution risk that should arise from this placement.

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Anna Bossong
Edison Investment Research
+44 (0)20 3077 5737

Katherine Thompson
Edison Investment Research
+44 (0)20 3077 5730
tech@edisongroup.com

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