Nanostart (OTC:NASRY) received a bullish forecast from equity research firm Close Brothers Seydler on Monday, citing the nanotechnology investor's current share price as reflecting an "advantageous buying opportunity".
Frankfurt-based Nanostart provides venture capital financing for nanotechnology companies in various growth phases, with a focus on sectors such as cleantech, life sciences and IT and electronics.
Close Brothers re-iterated the German VC house's "buy" rating and EUR 32 per share price target, as its main portfolio companies are poised for mid and long term growth.
Despite positive reporting results in 2010, Nanostart has seen a "lacklustre" share price, meaning there is future upside for the firm, according to Close Brothers.
In 2010, Nanostart reported a profit of EUR 2.48 million, more than double the previous year, due mainly to the successful exit of certain holdings, which raised around EUR 4.4 million. Costs, specifically wages and salaries, were also reduced from the prior year, as were write-downs on investments.
Three exits were announced in 2010, including Curiox Biosystems, NanoGram and BioMicro Systems, with the BioMicro transaction due to complete this year, generating further cash for Nanostart in 2011.
New investments of the firm also included Microlight Sensors Pte, a Singaporean company that develops and produces optical high-tech monitoring systems, and MINT, which develops membrane-based sensors that monitor water quality in plants.
"Despite the positive news flow in 2011, Nanostart’s lacklustre share price has not reflected confidence. It would appear that the market awaits positive news flow from Nanostart’s most significant portfolio companies, ItN Nanovations AG and MagForce Nanotechnologies AG," Close Brothers noted in its research report.
"As both of the aforementioned companies are poised for solid growth in the mid to long term, and while Nanostart continues to have success with its smaller portoflio companies particularly through the Singapore fund, Nanostart’s current share price presents an advantageous buying opportunity."
Indeed, the company's core holding, MagForce Nanotechnologies just announced on Friday that it established a treatment centre for its NanoTherm therapy for brain tumours at Charite-Universitatsmedizin, in Berlin, beginning the commercialization of its products.
MagForce is focused on nanomedicine in oncology. The company has received EU approval for its medical devices, which use magnetic nanoparticles for the treatment of brain tumors, injected in a procedure similar to a biopsy. In line with its 2011 commercialization phase, the medical technology company has expanded its management team with sales and marketing personnel, preparing itself for what is expected to be a period of significant growth.
In addition, Nanostart's other main holding, ItN Nanovation, has also made operational progress in the past fiscal year, especially in terms of its nano-ceramic technology products, known as CFM systems, which are used to pretreat water from deep wells into clean drinking water, using a reverse osmosis process.
In the third quarter, ItN installed the systems at a drinking water plant in Saudi Arabia, soon receiving a follow-up order, and carried out preparatory work in the region for a joint venture with a consortium of investors. The venture is expected to be finalized this year, with an anticipated earnings effect of around US$2.35 million.
Aside from Nanostart's two largest holdings, the company also has a myriad of investments through its fund in Singapore, for which it is partnered with the Singaporean government. The venture capital firm also recently launched a joint EUR 50 million fund for the Russian market with RUSNANO, with the objective of investing in young nanotech companies in the Perm region. Nanostart will invest up to 25% of the fund, and will also receive a 3% annual management fee, equating to EUR 1.5 million, with a performance fee of up to 25%.
Nanostart's share price last closed at EUR 14.15, a far cry away from Close Brothers' EUR 32 per share target, meaning investors can expect to see a number of growth catalysts in the coming year.