valuationIf previously unaware, anyone invested in the Canadian royalty trust sector now knows, there is such a thing as political risk. The challenge for Westaim is to establish TDEL as a low entry cost, highly reliable option (i.e. product in the market and selling well) before the transition to flat panel hits full stride. If the challenge is met, there is a good chance TDEL becomes the preferred choice. Under this scenario, we have a ten bagger and then some. Maybe a twenty bagger from these levels.
This is not a Beta vs VHS scenario. It is more a cable vs satellite dish scenario. Cable was well established in cities for years and now we see plenty of these dishes on roofs. If Westaim is late, then it’s initial share of the market is significantly reduced and increasing market share becomes dependant on industry growth and consumer demand, a slower and more difficult proposition. Nevertheless, IMHO, iFire remains viable and capable of generating positive and growing revenue. In this case, assuming no other preferable technology pops up in the interim, share price probably triples or quadruples over a number of years. Still an excellent ROI but is it worth the opportunity loss and the risk?
The key question is, when do CRT manufactures in China switch over to flat panel. Under normal conditions, I would say several years off. The profit margin on CRT plants is good and I suspect sales will remain good for a while especially in less affluent countries. The high cost of building LCD/Plasma plants remains prohibitive. The profit margin on LCD/Plasma TVs is low. The wild card however is that we are dealing with a Communist government. Lots of geopolitical risk. This story is going to be volatile and will evolve over a number of years not months. I still think WED shares are under valued at these prices but assessing risk, wow, probably the most difficult part of investing. Best keep the antacids handy.