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Microvision - ny kæmpeordre fra Sony

71917 Kaizers 18/3 2015 15:32

Siden mit indlæg for en uge siden har Sony fulgt op på licensaftalen ved at placere en komponentordre på USD 14,5 mio. Udover indkøb af nøglekomponent betaler Sony royalties pr. produceret enhed af Microvisions laserbaserede mikro-projektor;PicoP.

Det drejer sig formentlig om ca. 1 til 1,5 mio. komponenter. Svarende til samme antal PicoP, da det Sony køber er det lille centrale MEMS-spejl i projektoren.

MVIS har tidligere udtalt at de vil være breakeven ved ca. 1 mio. PicoP pr. år, hvilket antyder at de sammenlagt tjener 12-15 USD pr. PicoP på bundlinien. Det hører med til billedet at Microvision ikke selv producerer noget, men at al produktion er outsourcet til Asien og derudover består af royalties på deres patenter.

MVIS er i gang med at opskalere produktionen, og man kan så begynde at regne på hvad det vil betyde for aktien, hvis MVIS indenfor de næste par år sælger 2, 5 eller 10 mio. PicoP.

Det skal også med i billedet, at aktiekursen i mellemtiden er steget fra 2,70 til 3,70 under kæmpeomsætning. Efter min vurdering er det dog kun begyndelsen vi har set.

18/3 2015 16:25 Kaizers 071919

Indlæg fra Seeking Alpha:


Recent news should constitute a fundamental change in how investors value Microvision.
Validation of the company's technology is similar to a historical event for another company I cover.
The two situations are compared and contrasted with an eye towards developing a clearer picture for Microvision valuation going forward.
Simply put, Microvision (NASDAQ:MVIS) develops technology for pico-projectors. However, where other companies use LEDs and panels, Microvision's patented technology uses MEMs (MicroElectroMechanical systems) and lasers, which gives the company an advantage in size, cost and power consumption.

Recent & Ancient History

All through last year, Microvision was announcing development deals with major brand names like Sony (NYSE:SNE) and United Parcel Service (NYSE:UPS), and being noticed by the likes of Microsoft (NASDAQ:MSFT). Then, last week, Microvision announced a new, non-exclusive commercial licensing agreement with a Fortune Global 100 company, which was all but confirmed to be Sony on the most recent conference call. The projectors are expect to be used in internally developed end-user devices and resold to other OEMs as well. Microvision will be the sole supplier of components, and the agreement includes only IP related to the current projector, so additional licensing on future products is possible. The $8M upfront license payment more than doubles Microvision historical revenue, and there are royalties on each module sold as well. Today's press release indicates that $14.5M in component orders have been placed already. That means revenue should be approximately quadrupling this year.

Fundamentally, this shift from development to licensing reminds me of Universal Display Corp's (NASDAQ:OLED) landmark 2011 agreement with Samsung. That agreement was game-changing, and validated AMOLED screen technology in much the same way that Microvision's technology is being validated now. However, the market dynamics of the two situations are entirely different. Both companies are and were in the same ballpark with regard to number of floating shares, yet the traded volume for MVIS looks much more like OLED did in early 2010 and before, with just a few hundred thousand shares per day being traded. For OLED volume ramped in advance of the Samsung deal, but that process has just begun for MVIS, whose 90 average volume is 434K, but the 10 day average is over 1M shares traded. So whereas the fundamental change for OLED was well-anticipated, I don't think that's been the case for MVIS.

Outlook and Risk Factors

While I do believe that MVIS will migrate to a new, probably much higher, broad trading range based on revenue multiplying, it's very hard to saw that will be. Management gave no guidance on the conference call, and is actually still determining when and how revenue will be recognized. To me, the details of that are less important than the following factors:

Building Out Manufacturing Capacity: Capacity is set to expand dramatically in the second half of this year. Manufacturing is harder than most investors allow for. There's no sign of any problems so far, and I think the fact that the company is already shipping components reduces the likelihood of problems. Nonetheless, it would be good to get updates on facility progress and order fulfillment over the coming year.
CapEx: When asked, management did not rule out additional financing. However, Microvision has no debt and should have nearly $3OM in cash on or coming to the balance sheet this year. That figure dwarf expenditures for existing production. Consequently, I would expect that further major financing would only happen in connection with another huge leap forward.
New Development: On the technology side, Microvision should continue to improve brightness and color replication. I think both current products and the latest deal show that a unique niche is being filled. I don't think anybody is reasonably expecting picture quality to rival non-projector options but there is still plenty of room for improvement. As we've seen with many a new company, assessing the value of progress often takes specialized technical knowledge and investors should take care to educate themselves and not over-extrapolate.
New Deals: With this first commercial agreement in place, management indicated that significant staff will be freed to pursue not only new development, but new contracts as well. Another Fortune 500 customer that plans to introduce an innovative smart-phone in the second half of 2015 was already mentioned. Progress is also being made with vehicle OEMs.
Final Thoughts

I think that the multiplication of Microvision revenue is a fundamental change that is just beginning to be reflected in the stock price. To analogize between OLED and MVIS again, the former stock has traded at a Price to Sales ratio of around 10 over the past year or more, and was historically much higher than that in the earlier stages of its development. At current pricing, the P/S ratio for MVIS is about to be under 6. That's not to say that OLED and MVIS should have the same P/S ratio, but I think it does highlight that there is some fundamental justification for the argument that MVIS still has a long way to run. Volatility is a likely part of that process and the current rebate rate of over 9% may amplify that surrounding options expiration this weekend. Beyond that, markets are forward-looking and a growing group of investors will be constantly evaluating progress on the factors detailed above in order to project a whole new fair value for MVIS shares.