Nanofilm’s short interest spikes amid near-term challenges

THE short interest in Nanofilm Technologies International has more than doubled in the past week, making it the third most shorted stock in Singapore behind AEM Holdings and Singapore Airlines (SIA) as at last Friday (Nov 17), S&P Global Market Intelligence data showed.

Short interest – defined as the percentage of outstanding shares on loan – in the mainboard-listed nanotechnology solutions provider jumped to 3.53 per cent as at Nov 17, climbing from 1.61 per cent, the data indicated.

The percentage of shares outstanding on loan for Nanofilm last peaked at 4.05 per cent on Jun 30, before going on a downward trend.

Semiconductor-testing solutions provider AEM has been topping Singapore’s short interest chart for weeks, with the reading at 5.10 per cent as at Nov 17. National carrier SIA had a short interest of 3.94 per cent.

In comparison, the short interest across the Straits Times Index was 0.55 per cent.

Matt Chessum, director of securities finance at S&P Global Market Intelligence, noted that the short interest of about 3.5 per cent for Nanofilm remains fairly low by international standards.

“The company’s share price looks to have been under pressure this year with a decline of over 31 per cent. You can see that last week there was a move lower, which accounts for some of the additional short selling that is shown by the graph,” he said. Nanofilm share price dropped to S$0.83 in intra-day trading on Nov 17 – just a notch higher than the 52-week low of S$0.805 – before easing to close at S$0.85.

FSMOne.com research analyst Charmaine Tan pointed out that Nanofilm’s group revenue of S$128 million for the nine months ended September – a 29 per cent year-on-year decline – hit only 68 per cent of consensus estimates.

Nanofilm said it turned in a net profit for Q3, but did not disclose the figure.

However, it pointed out that its bottom line for FY2023 may be negatively affected if demand for consumer electronics products remains muted in Q4. Nanofilm had a net loss of S$7.6 million for H1, swinging into the red from earnings of S$18.8 million for the year-ago period.

Its management also flagged an uncertain outlook for FY2024, while ongoing expansion in China, Europe, Vietnam and India could incur high operating costs in the near term. The group may only reap significant earnings from these ventures further down the line. In light of this, Tan of FSMOne.com said there could be a longer-term investment horizon for investors who hold Nanofilm shares.

Meanwhile, analysts have cut their target prices for Nanofilm, signalling a bearish market outlook. At least two research houses have trimmed their target prices for the stock, which debuted in October 2020 at S$2.59 and once reached a peak of S$6.302.

DBS reduced its target price to S$0.83 from S$0.88, and described the stock as fully valued. UOB Kay Hian slashed the target price by 34 per cent to S$0.66, and downgraded the counter to “sell” on “a more challenging mid-term outlook”.

Nanofilm shares, however, have been on a bullish run so far this week. The counter was down 1.1 per cent at S$0.89 on Thursday (Nov 23), and is up 4.7 per cent since the start of the week.