Nanoco’s launch of litigation against LG and announcement of a joint development agreement (JDA) with a second Asian chemicals business provide a further indication of the business’s reinvigoration. Both developments should also provide support for the planned disposal of the trading businesses, where Nanoco is now involved in in-depth engagements with a number of parties. The net impact of litigation costs versus JDA revenues should be broadly neutral on near-term cash burn (£0.5m/month). We believe the current valuation reflects a pessimistic scenario for Nanoco. Quantum dots are still expected to gain significant adoption across sensors and display, Nanoco has significant IP and expertise and its commercial pipeline is growing again. The market cap is broadly equivalent to its net cash position of £15.2m as of 4 April.

Nanoco’s interim results highlight a number of encouraging developments. All milestones have been achieved with the company’s Asian chemicals customer and phase two should start in H225 or H126. Nanoco is also in advanced discussions with another Asian materials and chemicals company to develop quantum dots for short-wave infrared (SWIR) applications. Discussions with a number of potential bidders are ongoing, with initial proposals expected to be received in the summer. Following cost reductions, cash burn has been reduced to £0.5m per month. Net cash of £15.2m as at 4 April compares to Nanoco’s current market cap of £13.9m. This appears to factor in a pessimistic scenario, given the signs of commercial reinvigoration and bid interest.