Nanofilm shares fall 28.8% on disappointing H1 results despite firm's upbeat outlook
It is among the day's worst-performing stocks; plans are underway to capture greater market share in 3C sub-segment
Claudia Tan HS
Singapore
SHARES of Nanofilm Technologies International ( MZH ) fell 28.8 per cent on Monday to S$4.25 following a disappointing set of half-year results announced last Friday. This is despite the firm's expectation of higher business activity in the second half as it enters peak season and the prospects of new projects - such as its venture into hydrogen fuel cells - coming to fruition.
Nanofilm was among the worst-performing stocks on the Singapore Exchange on Monday. Year-to-date, its share price is down 3.4 per cent. It is also 36.3 per cent lower than its 52-week high of S$6.67 on July 26.
Nanofilm's net profit dipped 3.1 per cent to S$17.9 million for the first half of this year, from S$18.5 million the previous year, amid higher costs in manpower and manufacturing overheads.
Revenue had improved 24.2 per cent to S$96.6 million for the six months ended June 30, from S$77.8 million in the corresponding period last year.
While topline growth was led by its advanced materials business unit, which saw an 18.5 per cent increase in revenue to S$76 million, chief financial officer Kay Lim said in a media briefing on Monday that the firm was "not happy" with the performance. He added that revenue for the segment was dragged by delays in projects as a result of global supply chain disruptions caused by chip shortages.
Still, plans are underway for Nanofilm to capture a greater market share in its 3C (computer, communications and consumer electronics) sub-segment. Mr Lim is anticipating a recovery of the mass production of consumer electronics such as wearables as well as smartphones, which have continued to deliver strong growth.
This is given that its services and products in the 3C sector tend to be in line with new product launches or product upgrades in the third quarter. This is, however, subject to changes in consumer pattern or the group's customers' timing to launch new products or product upgrades.
Its automotive sub-segment has, however, registered strong growth and is in line with expectations.
The nanofabrication business unit also underperformed and failed to meet the firm's expectations, declining 47.8 per cent to S$1.7 million, primarily due to the end of life of projects, though the firm is expecting more new projects to come.
Nanofilm is developing new product ranges in the optical lenses and sensors space, which will support upcoming areas of growth such as the biomedical field, said Mr Lim.
The industrial equipment business unit clocked an 80.8 per cent increase to S$19 million as more customers increased their capital expenditures, said Mr Lim.
Meanwhile, the group is looking to anchor its presence in the electric vehicle (EV) space through its hydrogen energy business and will look towards capturing greater share in established end-markets.
The firm had in July announced that it had a definitive agreement with state investment company Temasek to enter the hydrogen energy and hydrogen fuel cell business through a joint venture, Sydrogen Energy.
Mr Lim said that there is strong potential in the fuel cell hydrogen market given that it is still "very much in a nascent stage".
"We will control certain parts of the supply chain all the way from making certain components and parts with our nanotechnology, our advanced materials coating, followed by the follow-on treatment as well as processes to deliver the whole finished components for our customers for integration and assembly," he added.
Hydrogen fuel cells will generate electricity that is cleaner and more efficient, as they emit only water; unlike conventional sources of energy, they do not emit carbon dioxide or other pollutants that are harmful to the environment.
"So with that, we strongly believe in terms of contributing to negative or reduction in carbon emission, hydrogen fuel cell will be one of the key technologies when it comes to energy transition," said Mr Lim.
Recent management changes have also come into focus following the resignation of its chief operating officer Ricky Tan and after chief executive and executive director Lee Liang Huang announced on June 23 that he would resign from his role due to health reasons.
Nanofilm said that Mr Tan stepping down is part of the firm's overall re-organisation. It added that the restructuring has nothing to do with the H1 financial results.
"We have been working progressively to increase the independence and the strength of our various business units," said co-deputy chief executive officer Gian Yi Hsen.
This will also allow Nanofilm's business units, which have already gathered experience over the past nine months, to operate "on their own with full responsibilities for production and sales", he said.
In a research note on Monday before market open, Citi analyst Hussaini Saifee said that the company's 24 per cent year-on-year growth in revenue was below earlier growth expectations of 42 per cent for FY2021.
While Nanofilm had said that there are multiple strategic projects to shape H2 of 2021, Mr Saifee said that it remains to be seen whether these projects will be able to meet the high expectations.
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