MARKET REPORT: Patience pays off for Nanoco as it launches quantum dot production

By Geoff Foster for the Daily Mail

Patience is definitely a virtue. When shares of Nanoco were languishing at a friendless 83p in July, small investors must have been close to giving up the ghost. 

Many had piled into the stock in January 2013 after the company, which was spun out of research pursued at Manchester University, announced a ‘transformational’ global licensing agreement with Dow Electronic Materials, a business unit of Dow Chemicals.

They subsequently touched a high of 183p as analysts said the high royalty bearing agreement was a game changer. However, selling soon ensued as the market became impatient awaiting further details. Dealers feared it would still be some time before Nanoco made a profit.

Deal: Nanoco announced a 'transformational' global licensing agreement with Dow Electronic Materials 

Much to shareholders’ delight, Nanoco and Dow yesterday put a lot more meat on the bones and the shares rocketed 27.5p, or 23pc, to 146.5p. 

The world leader in the development and manufacture of cadmium-free quantum dots or nanomaterials for use in the production of lighting and ultra-thin televisions, revealed that Dow Chemical has started production of the world’s first large-scale, cadmium-free quantum dot manufacturing plant. 

The plant is capable of supporting the manufacture of ‘millions of cadmium-free quantum dot televisions and other display applications’.

Production is expected to begin in the first half of 2015 and the quantum dots will be marketed by Dow under the brand name TREVISTA Quantum Dots.

The start of production will trigger a $2million milestone payment from Dow to Nanoco, which should go a long way in eventually helping the Manchester group break even. 

Broker Canaccord Genuity has a target price of 275p and assumes the first customer will be either Samsung or LG. Rival Liberum said Nanoco is on the threshold of major growth in its revenues, earnings and cash flows. It forecasts revenues to rise from £5million in 2015 to £51million by 2017.

Despite record interim profits, up 30 per cent at £4.1million, and a 10 per cent dividend increase to 7.3p a share, Judges Scientific, which designs, makes and sells scientific instruments, succumbed to profit-taking and fell 235p to 1302.5p. 

Some investors were spooked by a line in the statement that revealed slow market conditions for order intake remained, putting pressure on short-term forecasts.

Yet broker Shore Capital remains upbeat. Analyst Robin Speakman said Judges retained a track record of sustained growth and was financially strong with exposure to healthy long-term growth prospects through both organic and acquisitive means. 

The Footsie stopped the rot, rallying 30.19 points to 6,706.27 with sentiment helped by European Central Bank chief Mario Draghi’s promise that eurozone monetary policy would remain accommodative for a long period. 

Wall Street also behaved itself with a gain of 154.19 points to 17,210.06 on hearing that new US home sales rose 18 per cent, hitting a six-year high in August.

Mining giant BHP Billiton attracted late support following confirmation it was considering a London listing for a demerged company made up of some of its base metals and coal assets worth around $16billion. Shares closed 56p higher at 1797.5p. Rio Tinto put on 74.5p to 3182.5p in sympathy.

Diehard professional punters switched on to Vodafone (again) amid revived speculation that US telecoms giant AT&T could soon bid north of £3 a share. 

After intense speculation in January, the second largest mobile operator was forced to say that it didn’t plan to make a bid for the UK mobile phone giant. Under Takeover Panel rules it has been free to make a move since July and the weak performance of the Vodafone share price has made a mega deal now look even more tempting. Voda buzzed 5.6p higher to 204.25p.

Chef & Brewer and Fayre & Square pub chain Spirit frothed up 2.25p to 91p as speculators banked on the group losing its independence. Greene King, 17.5p down at 776.5p, had an all-paper bid worth £660m or 100p a share rejected by the Spirit board and sector analysts are confident other thirsty bidders will emerge. 

Colony Capital and Starwood Capital, two of the underbidders in the auction for the Orchid pub company, could be interested. All Bar One group Mitchells & Butlers lost 13.4p to 405.6p on fears it could get involved in a bidding war.

Bank of Georgia fell 64p to 2434p after the European Bank for Reconstruction and Development sold its 5.1 per cent stake. The stock was placed with a range of international institutional investors through RBC Capital Markets and UBS. 

The EBRD had held its stake since 2012 following the conversion of a financial package provider in December 2008 in its response to the global financial crisis.

Updated: 17:26 EDT, 24 September 2014