Small companies typically rely on the two days in the sun that are full-year and half-year financial results. Yet for early stage hyper-growth specialists, such as Nanoco (NANO:AIM), the story is not in the here and now, but in exponential growth promise. For the record, today's interim results were bang on the expectation money.
Revenues all but doubled to £2.5 million, from £1.3 million a year back, and losses were cut from £2.4 million to £1.6 million, with net cash of £12.5 million providing a significant buffer until its planned profits breakthrough, pencilled in for 2015. This, perhaps better than anything, explains the fairly muted share price response, edging up 1.6% to 189p. It is also worth considering that Nanoco valuation has nearly trebled since being flagged by Shares as a Play of the Week a year ago ('buy' at 66.1p, 1 Mar '12).
The real story is in the commercial tie-ups Nanoco has pulled off to date, not least the deal signed with Dow Chemical (DOW:NYSE) for exclusive rights to manufacture and market Nanoco’s cadmium-free quantum dots. Quantum dots are tiny, fluorescent semiconductors used to make next generation electronics and Nanoco's IP-protected manufacturing method avoids using cadmium, a heavy metal that is banned in many countries because of its potentially toxic effects.
Nanoco is working on plans to build a 400kg lab near its existing UK factory in Runcorn. Yet at a stroke, the Dow deal could see commercial production soar to many thousands of kilos of quantum dots a year over the next 12 to 18 months; the company estimates full production some time in 2014.
Nanoco's trademarked NanoDot technology is being used in several applications, including solid state lighting, solar panels, even some medical devices, but it is digital displays that look the most promising market in the near future. The latest generation of TVs use the OLED (organic light emitting diode) technology containing quantum dots. This allows them to be made thinner, have a sharper picture and run using significantly less power. That LCD displays market is worth up to $100 billion a year if you factor in the future potential to roll out this technology into mobile electronics, including smartphones and tablet computers. Samsung (005930:KS), LG (003550:KS) and Sony (6758:T) are among the number of seemingly ready-made customers.
That vast growth potential from just one market looks set to spark enormous growth for the Manchester University spin-out. Full-year revenues of around £4 million this year could hit £100 million-plus by 2017 if all goes to plan, putting close on 40p per share of earnings on the cards. That implies a price/earning (PE) multiple of less than five, or spin it around, assuming a PE of 20 would imply an 800p share price inside four years.
Of course, this relies on a fair number of 'ifs' and 'buts' coming off in Nanoco's favour, but there is little doubt that this exciting, and not so little, company is rapidly moving from technology potential to technology promise.