Quantum Materials Corp Update (OTCQB: QTMM)
TRENDING - 4K UHD PANEL SALES PROJECTED TO REACH 330M+ UNITS BY 2019
· QTMM Named 3rd Most Important Global Quantum Dot Company by New Materials News
· Appoints Major Flat Panel Industry Veteran Sri Peruvemba
· Quantum Founder and CEO Stephen Squires Interview
There has been much to talk about of late regarding Quantum Materials Corp as they continue to materially advance their business, so we are sending out this update to get everyone up to speed on just how the market for quantum dots is poised for explosive growth in the last quarter of 2015 and into 2016 - and how we expect that explosive growth to add value for QTMM shareholders.
Yes it's been a long wait for many of the early adopters that saw the quantum dot age coming - and like many new technology breakthroughs the reality of adoption is oftentimes quite a bit slower than the product rollout, but we can say with much confidence that the wait is officially over and the "age of quantum dots" is now here. You are likely now wondering "well who in their infinite wisdom made this decision?" Well that's quite simple. Like all things that move from fringe to mainstream in the electronics realm, the ultimate "decider" in these revolutions is the almighty retail consumer and "THEY" have decided that"yes, I will now trade you a couple thousand of my hard earned dollars (or lay down my XYZ Visa card) for that next generation, large format flat panel display that just looks so ridiculously better than the one I have at the house, I just can't resist it anymore."
Yes my friends, we are now looking at the leading edge of the much heralded"replacement cycle" for flat panel displays and when you combine these market forces with purchasing power from the emerging market regions that are now just entering their "original purchase cycle", this adds up to a market so lucrative to the OEM optoelectronics industry - it has become an "all hands on deck" land rush to gain market share and command shelf space. This mass consumer buying phenomenon is being driven by a triumvirate of next generation flat panel technologies which include 4K UHD liquid Chrystal displays (ultra-high def sets delivering 4 times the number of pixels), HDR (or high dynamic resolution, a hardware technology that intensifies contrast and screen detail in dimly lighted areas) and WCG (or wide color gamut screens driven by you guessed it - quantum dot infused film that deliver super vivid color palettes approaching what the human eye can see). The title of this post is the key takeaway here, with 4K panels expected to reach 330M+ units per year by 2019 (full article at: http://www.parksassociates.com/blog/article/pr-oct2015-cedia-2 When you figure that 4K panels sales in Q1 2015 was estimated at roughly 4.7 million, we are looking at some massive yearly growth numbers in 4K panel sales over the next couple of years (approaching or possibly exceeding triple digits) and we expect a very large percentage of those 4K panels to incorporate quantum dot technology to ramp up the color gamut. The reason we see the quantum dot adoption ramping in parallel with 4K growth numbers is simple. UHD is great by itself, but when you can add WCG for just a few more dollars per screen (current rough estimates are in the $75 -$100 range for adding QD film to the stack buildup of a 55 inch set) the combination creates a package that looks to the consumer to be just as good as premium priced OLED sets for about 1/2 the retail cost. (In fact it is this very dynamic that is kicking off the massive ramp up in sales velocity for 4K panels).
How does this benefit QTMM shareholders? Well that's an easy one as well. If you look out a year or so into the 2016-2017 time frame at the 4K adoption numbers (you can even cut these numbers way back to account for 4K units that don't get shipped with QD technology) you are looking at large quantities of quantum dots needed to satisfy demand (every 10 million 55" sets would require roughly 5 metric tons of pure quantum dots or about $750 million in revenues at a $150 per gram price point) - we continue to see projected QD pricing for large committed quantities in the $100 to $200/gram price range from several sources). Quantum Materials Corp. is currently sitting on 2.25 metric tons of annual QD capacity, and can easily ramp this level up with low CAPEX in increments of 2 metric tons per machine, so they are very well situated to become a major supplier as this market expands. There are several other competitors with current and planned capacity as well that will help fulfill this market demand, but with QTMM's ability to make both cadmium based and cadmium free quantum dots at high performance specifications, we expect they are uniquely positioned here to grow sales rapidly in the near term as this market takes off. Quantum Materials has currently two joint development agreements in place for developing optoelectronic components (both film and LED solutions) with two large groups, the first a major OEM panel manufacturer that has yet to be named publicly, and the second with one of the largest chemical film suppliers Nitto Denko group out of Japan that has very large market share in optoelectronic/polarizer/color resist film products and sells to many of the majors including LG, Samsung and Apple among many others.
Filling just 1/4 of QTMM's current capacity would produce topline revenues in the $85 million range. With low CAPEX/OPEX inputs we expect Quantum will have excellent margins at these rates so this could lead to some very compelling EBITDA numbers. At a 50% margin they could still be looking at over $40 million in EBITDA less their corporate overhead and rapid growth tech stock multiples these days (pick your number) could create some very interesting market values at these levels.
When we can, we like to get down to the street level and talk with the players at the retail level so we have been making a trip every 2 weeks or so to our local Costco store to chat with the floor rep and see what the merchandising looks like for some of these new panels. We have gotten to know the Samsung rep pretty well and each time we chat we learn a little more about how things are going for their line of quantum dot sets which are easily identified by their SUHD branding. Well, from my discussions it appears as if Samsung is tearing it up with this new line and they are having to reorder inventory on a regular basis to keep stock on hand. The SUHD must be selling tremendously well as these sets are now commanding the premium locations (end of aisle next to traffic) and they have now put the 78" set into the lineup. We have no doubt that the other brands are watching this situation a lot more closely than we are (and it's likely showing up in sales reports) and you can be sure that they are moving quickly to match the viewing quality of the SUHD line as quickly as possible to once again even this now disrupted playing field and they are all going to need 100's to 1,000's of kilograms of high performance quantum dot infused film to get the job done. So we see the next few months as a seminal time for QTMM as they look to establish a customer base and supply chain for their quantum dot's and optoelectronic "drop in" components/film in collaboration with their joint develoment partners. With shares trading in the $0.14 to $0.15 range and much of this potential growth expected in the next couple of quarters, we see great things ahead for Quantum Materials Corp. and their shareholders.
Additional QTMM Updates:
Recently New Materials News published their top 5 League Table for global quantum dot companies with QTMM bringing home the bronze metal third position beating out both Samsung and QD Vision in the process. In the announcement NMN cited QTMM's new heat, moisture and oxygen stable QDX™ product line and ability to produce large quantities of high perfomance specification with rapid scale up and low capex capability as key value drivers for notching third place position. Another key driver was the recent Joint Development Agreement inked with optronic materials juggernaut Nitto Denko out of Japan - a group that is uniquely positioned to move electronic components rapidly into a distribution channel with strong pre existing relationships and present product sales to many of the OEM groups that are going to be moving aggressively into quantum dot format displays. Here is a link to the announcement and background on QTMM: http://newmaterialsnews.com/top-stories/top-10-quantum-dot-companies-one-to-five
Sri Peruvemba added to Board of Directors;
Also, QTMM recently announced the addition of a highly accomplished player in the display optoelectronic space with the addition of Sri Peruvemba to their Board of Directors. Sri is an absolute "rock star" in the flat panel display industry and is going to be a tremendous asset to the Quantum Materials board as they move forward in this rapidly developing and exciting industry revolution for wide color gamut panels. You can learn more about Sri background and credentials from the recent press release at: http://www.stockhouse.com/news/press-releases/2015/10/15/sri-peruvemba-joins-quantum-materials-board-of-directors
Stephen Squires Interview;
Here is a link to a recent video interview with QTMM founder and Chief Stephen Squires on Stock News Now wherein he goes into detail about the technology and timeline to (QTMM) commercialization:
Quantum Materials Corp. - Develops and Manufactures Quantum Dots and Nanomaterials for Medical, Display, Solar Energy and Lighting Applications
If you still have any doubt that the "Age of Quantum Dots" is not officially here - we suggest you jump in the car and visit your local Costco of Bestbuy store and get an eyefull of one of the new Samsung SUHD displays. Once you do, you'll know exactly what we're talking about here - and if your not ready to buy one just yet (we expect prices to continue to come down even further over the next quarter or two as competition heats up so you might want to wait just a bit longer) we suggest you leave your wallet/checkbook at home, otherwise you just might come home with a big box in the back of your car. Yes, they are that freaking good!!
Wishing everyone a great Fall October weekend and we will continue to keep you up to speed on the developments at Quantum Materials Corp.
SD Torrey Hills Capital
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