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Nanoco’s extension of its partnership with a major listed US corporation indicates the relationship could be both significant and long lasting. Visibility remains limited, but with revenue opportunities across three applications, sensors, display and lighting, we expect to see a meaningful inflection in financial performance from here. Nanoco’s credentials as a platform technology company are also strengthened.
Written by
Nanoco |
Extension of major partnership |
Extension of partnership |
Tech hardware and equipment |
23 April 2018 |
Share price performance
Business description
Analyst
Nanoco is a research client of Edison Investment Research Limited |
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Nanoco’s extension of its partnership with a major listed US corporation indicates the relationship could be both significant and long lasting. Visibility remains limited, but with revenue opportunities across three applications, sensors, display and lighting, we expect to see a meaningful inflection in financial performance from here. Nanoco’s credentials as a platform technology company are also strengthened.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
EV/sales (x) |
P/E |
07/16 |
0.5 |
(12.3) |
(5.2) |
0.0 |
193.5 |
N/A |
07/17 |
1.3 |
(10.6) |
(4.5) |
0.0 |
74.4 |
N/A |
07/18e |
4.7 |
(6.4) |
(2.3) |
0.0 |
20.6 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, share-based payments
The agreement is with the same large listed US corporation with which the company announced a partnership in February. That partnership is for the scale up and mass production of infrared nanomaterials for sensing/sensor applications with volume production is expected to start in Q119. This agreement is for the research and development of nanomaterials for potential use in the same or similar applications.
Nanoco was selected by this partner through a competitive process against a number of much larger players. Management cites the company’s IP (c 600 patents or patent applications), world-leading nanomaterials R&D expertise and ability to manufacture at scale as factors in the decision. The doubling of manufacturing capacity at Nanco’s Runcorn site to support the first agreement indicates the potential from this partnership is significant. This follow-on R&D agreement suggests the partnership has the potential to be a lasting one.
We still lack the visibility to forecast beyond FY18, but the milestone payments from this deal should provide further revenue and balance sheet support in the near term. With a maturing portfolio of volume shipment opportunities across sensors, display and horticultural lighting, we expect to see a meaningful inflection in financial performance from here.
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Disclaimer
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By acquiring Ladbrokes Coral (LCL), GVC will become a FTSE 100 global gaming business, with pro forma FY18e revenues of £3.4bn. With strong brands, diversified revenues and a superior technology, GVC is well positioned to benefit from increased scale and we anticipate the deal to be highly accretive, due to the £100m+ cost synergies. At this stage, there are still many moving parts to our pro forma estimates, with particular uncertainty surrounding the outcome of the Triennial Review and ultimate FOBT stake limits. Irrespective of the outcome, strong FCF should rapidly drive down leverage, which peaks at 3.2x for a £20 FOBT scenario (2.7x for £2). Assuming a £20 stake limit, GVC trades at 11.2x EV/EBITDA and 13.3x P/E for FY19e, a c 5% and 19% discount to Paddy Power Betfair (PPB).