GMP research updateWestaim Corporation (WED $4.26; Target: $7.15) FOCUS BUY
iFire Technology unveils 34” display at 2004 SID
Developments
Last week we had an opportunity to attend the Society for Information Display (SID)
conference in Seattle, Washington, which is the annual trade show for the display
industry. It was at this event that iFire Technology unveiled its 34” high-definition
prototype display to an audience of flat panel scientists and industry peers. The 34”
display is the largest display ever produced using inorganic electroluminescent
technology.
Comments
Overall we believe this year’s SID was characterized by no new technology as the plasma
display manufacturers (PDP) and the liquid crystal display (LCD) manufacturers focused on
showing bigger panels. In fact, we feel it could be argued that iFire’s 34” display was the
closest thing to a new display technology at this year’s show. With respect to larger
screen sizes, Samsung claimed to have the world’s largest PDP display with its 80” screen.
In addition, the company also claimed to have the world’s largest LCD panel with a 57”
display. While the sheer size of these displays was impressive, the picture quality itself
left a lot to be desired, which is quite interesting given the image enhancements used at
these sorts of venues. The OLED technology, which first made a big splash two to three
years ago, also reappeared at this year’s show. Both Samsung and Phillips displayed OLED
screens, with both manufacturers claiming that phosphor lifetime duration was no longer
an impediment to commercialization. Having said this, Phillips did indicate that its 17”
screen was a prototype and that it would likely be 2007 before the technology could be
developed commercially into a television display. iFire’s 34” display was not on exhibit
at the trade show, as management was using the screen in its partner candidate meetings.
Having said this, the company did host a reception where the 34” panel was displayed.
Not only was the reception extremely well attended, but we believe the screen created
quite a bit of excitement in the industry and several publications reviewing the show have
made specific mention of iFire’s accomplishment. It should be noted that the Industrial
Design and Construction Group (IDC), one of the world’s largest designers and builders of
flat panel display and semiconductor manufacturing facilities, conducted a study that
concluded that the fewer process steps in the iFire manufacturing process (58 versus 86
for plasma and 178 for LCD) should allow for a 30%-50% cost advantage for iFire relative
to the incumbent technologies. As we have stated on prior occasions, the significance of
the 34” screen is that it provides proof that iFire’s technology works. The last remaining
hurdle on the path to commercialization is securing a manufacturing partner. Towards this
end, management did indicate that the presence of the 34”panel did create a renewed
level of interest among the partner candidates with whom they met. iFire’s target remains
to commence prototype production of 34” panels in Q1/05, with commercial production
expected to begin in 2006. We believe WED represents a classic risk/reward scenario.
Our target price of $7.15 incorporates iFire at a 50% discount to our DCF value. At a 50%
discount, iFire represents $4.42/share of our $7.15/share valuation. We believe
incorporating iFire at a 50% discount to our fundamental valuation is reasonable as
investors are unlikely to recognize its full value until the company has secured a
manufacturing partner. Conversely, if one assumes that the iFire opportunity is not
material, then WED as an entity is likely worth around $3.00/share. Although we do not
adhere to this view, we believe the stock offers limited downside protection, while some
very attractive upside could be realized through successful commercialization initiatives at
either iFire or Nucryst Pharmaceuticals. It is worth noting that iFire continues to maintain a
sound financial position, with a cash balance of $94.1mm, or $1.20/share, and no debt.
Recommendation
We continue to be encouraged by the ongoing progress achieved at both iFire and Nucryst.
As such, we continue to recommend WED as a FOCUS BUY.