We undertake equity investments in emerging nanotechnology companies which hold the potential to deliver extraordinary long-term growth. The typical size of our investments is between one and ten million Euros.
Equity research firm Close Brothers Seydler released a report on nanotechnology investor Nanostart AG on Friday, stating a 'buy' recommendation and a price target of EUR 30.80, nearly double its last closing price.
Nanotechnology refers to the creation of structures at the molecular and atomic level. Generally speaking, these structures have a maximum size of 100 nanometers. In practical terms, a human hair is about ten thousand times thicker than one nanometer.
Frankfurt-based Nanostart invests in emerging nanotechnology companies, both public and private, that span across Europe, Asia and the US. With EUR 35 million invested to date, its current portfolio consists of nine companies across a variety of industries.
"The biggest holding, MagForce, is a shining star of the portfolio, having developed a revolutionary treatment for solid tumor brain cancers. The second largest holding, ItN, is leading the way in water filtration using ceramic treated with nanotechnology," said Close Brothers.
The research firm also noted that Nanostart is partnered with the Singaporean government and works closely in a joint fund to invest in companies out of Asia, giving it a "first-mover advantage".
Among Nanostart's positives such as its management team, Close Brothers said that there is also no exit timeline or pressure, meaning companies are sold when "the time is right". The venture investor has had eight corporate sales or public offers until now and three write downs, among a total of 18 investments thus far.
"There exists significant upside potential above and beyond our fair value estimate due to the private companies in the Nanostart AG portfolio being valued at cost and not market value. At exit, it is likely they will be worth more," Close Brothers added.
The company's "sum of parts valuation" adds the separate discounted cash flow values of MagForce and ItN, the two largest holdings, as well as the value at cost of the private company holdings. The valuation is also based on several key assumptions – one new acquisition in 2010, two in 2011, a further two in 2012, followed by the two exits already executed in 2010, and three each in the following two years. Close Brothers noted, however, that exits are difficult to forecast.
From 2006 until 2009, Nanostart's assets increased from EUR 17.25m to EUR 35.27m. Close Brothers is predicting the growth trend will continue, and projects a forecast asset value of EUR 43.38m in 2012. Likewise, net income for shareholders is also predicted to rise, reaching EUR 3.81m in 2012 from EUR 1.19m in 2009.
Close Brothers concluded: "Being a significant shareholder in both MagForce and ItN, Nanostart's asset value and bottom line will change significantly with any developments in these two core holdings, both on the upside and downside."
In addition to these two major investments, other companies of note in the portfolio include BioMers, Namos, Holmenkol, Curiox, Nanosys, BioMicro Systems, and Lumiphore.