Thinfilm |
OpenSense to be marketed in retail POS solution |
Alliance with Tata Consulting |
Tech hardware & equipment |
22 January 2016 |
Share price performance
Business description
Analysts
Thinfilm Electronics is a research client of Edison Investment Research Limited |
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Thinfilm and Tata Consulting Services (TCS) have announced a global alliance to deploy Thinfilm’s NFC OpenSense and NFC Barcode labels in shelf labels. This will be part of the TCS OmniStore POS Platform and the TCS Optumera suite of pricing software, and POS terminals and scanners. By tapping OpenSense labels with their NFC-enabled smartphones, shoppers will be able to access product information, promotional offers and usage tips to improve their experience, while user data will be captured for use by the retailer. Based on the expected $0.30-0.50 pricing point, we believe that typical order sizes of upwards of $240k could be realised after pilot programme completion, and more if the labels are added directly to products.
Year end |
Revenue ($m) |
PBT* |
EPS* |
DPS |
EV/Sales |
Yield |
12/13 |
1.9 |
(10.4) |
(2.5) |
0.0 |
67.4 |
N/A |
12/14 |
4.5 |
(24.2) |
(4.9) |
0.0 |
28.5 |
N/A |
12/15e |
4.0 |
(28.0) |
(5.2) |
0.0 |
32.0 |
N/A |
12/16e |
13.2 |
(32.5) |
(5.9) |
0.0 |
9.7 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and share-based payments.
TCS and Thinfilm are presenting the products at the National Retail Federation’s annual EXPO in New York on 17-20 January. TCS’s suite of products is designed to boost store productivity and increase retail staff efficiency. TCS represents an attractive partner to Thinfilm, being a leading international business process service (BPS) provider with BPS revenues of $1.6bn and total group revenues of $15.5bn. Its client base also includes a cross-section of leading retail operators.
We estimate that Thinfilm could realise initial order values of more than $240-320k in due course. This is based on an anticipated selling point of $0.30-0.50 and a theoretical roll-out across a chain of 100 stores (vs US leader Macy’s with c 900), with 20,000 products on offer, of which the retailer is assumed to display the labels on the shelves of 40%. Order values could be much higher for other types of stores, with a typical large supermarket having c 50k products and large Walmart stores having up to 120,000 products.
The electronic shelf label (ESL) industry has already started offering NFC technology in higher-priced graphic labels, which are increasingly being targeted at non-food retailers, so we see these companies as presenting a competitive threat to Thinfilm in this area. For retailers not looking to deploy ESLs or looking to add Thinfilm’s NFC-enabled labels to standard ESLs, NFC OpenSense labels have the advantage of not requiring battery power and being integrated within TCS’s platforms.
This announcement is a welcome continuation of positive news of recent weeks. Leading pharmaceutical packaging company Jones Packaging announced on 22 December that it is to integrate NFC OpenSense into its paperboard pharma packaging, and placed a six-figure unit order for the labels. Also in December, the European Commission announced a three-year €472k grant to Thinfilm to help create a global-scale Internet of Things platform using open-source architecture.
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