Excerpts from Phillip Securities Research report
Analyst: Soh Lin Sin
Key Takeaways (from visit to company in Israel)
* atTerm Technologies, one of the technologies developed by Trendlines Labs, is estimated to have more than US$2 billion market potential in developed countries alone. However, the technology accounts for zero value in Trendlines’ total portfolio value as they are developed in-house. Successful realization in investment would boost the Group’s revenue.
(i) add more than 30 companies to its portfolio over the next three years;
* Undemanding valuation. Trendlines’ Price-to-Portfolio Value and Price-to-Net Asset Value are trading at c.53% discount to its peers (see table)
* Risk of facing cash flow problem. Realization of investment in its portfolio companies is unpredictable and volatile, and there is no assurance as to the occurrence of timing of actual exits or realizations to meet its cash needs.
* Difficult to value individual portfolio companies accurately. Main source of earnings is derived from net realized/unrealized gain in the value of its portfolio companies, which is unpredictable and volatile.
* Subject to inherent risks associated with investing in early-stage, high-risk technology companies.
* Regulatory changes, which could have adverse impact on operations, licensing and government loans and grants.
*Exchange rate risk. Functional and reporting currency is US$, but a significant portion of its operating expenses are in NIS (principally, facilities lease expenses, salaries and related personnel expenses).
Full Phillip Securities Research report here.