Date : 15/09/2020

Weebit Nano Limited

ASX :

WBT

Market Cap : $86.72 Million

Buy

52 Week Range : $0.2 - $1.04

Share Price : $0.82

With critical technology in the testing phase, the company is expected to announce commercial agreements with manufacturers and distributors within the next three quarters.

Company Analysis

Weebit Nano Limited (WBT) is an Israeli company founded in 2015 and traded on the ASX since 2016. The company is focused on addressing the exponentially growing need for new and advanced memories for computing devices. It is involved in the design and development of silicon oxide-based resistive random-access memory (ReRAM) technology.

The company has successfully raised a total of $12.2 million and it is funded for future commercialization activities:

In August 2019, the company raised A$3.1 million through a combined Placement and Entitlement Offer; On 17th July 2020, the company had announced the successful closing of its A$2.5 million Share Purchase Plan (SPP).

In June 2020, the company announced that it had secured commitments from existing and new sophisticated and institutional investors to place $6.5 million via a two-tranche placement.

The company remains fully funded for its next development phase and remains committed to sign its first commercial customer in 2Q FY 2021.

On 11th August 2020, the company completed the first stage of the stabilization process which is a key milestone prior to the commencement of production. This process was conducted at research partner Leti’s facilities and it improved the maturity of Weebit’s silicon oxide ReRAM technology by increasing cell to cell uniformity, resulting in a higher product yield which is measured by the percentage of working memory cells. The second phase of the stabilization process is underway prior to transfer of technology to a production facility.

The company has received €867,000 (A$1.45 million) from the French Government in relation to its R&D initiative.

Investment Thesis

The company is in research and development phase and it does not generate any revenue yet. The loss for the year ended 30 June 2020 was $4 million compared to a loss of $6.7 million in FY2019.

Total current assets were $4.3 million as on 30 June 2020 and primarily consisted of cash of $4.1 million. Total assets as on that date were $4.5 million. Total liabilities were $1.1 million while equity was $3.3 million.

Net cash used in operating activities for the year ended 30 June 2020 was $1.98 million, mainly due to payments to suppliers, consultants and employees, net of Research and Development grants received in France.

Net cash flows provided by financial activities for FY2020 were $4.4 million from share issuance, net of capital raising costs and repayment of lease liabilities.

WBT has only equity in its capital structure. This means the firm does not have any default risk, and is a strong indicator of a healthy company.

Recommendation

  • The company has launched developmental program with Leti to address the needs of the standalone memory market using Weebit’s ReRAM memory technology. This program will save the company substantial time and money by leveraging Leti’s five years of developmental work.
  • The company, in partnership with French research partner Leti, introduced the world’ first neuromorphic demonstration using Spiking Neural Networks (SNN) algorithms running on ReRAM memory technology.
  • The company has signed a Letter of Intent with XTX Technology, a Chinese developer of flash memory chips, to research on the possibility of deploying WBT’s SiOx ReRAM technology in XTX products and cooperate on sales and marketing efforts in China. XTX independently verified Weebit’s ReRAM technology in 2Q FY2020, four months ahead of schedule.
  • The company released a new ReRAM simulation model with US company Silvaco, a leading software and semiconductor IP provider, enabling the accelerated adoption of the company’s ReRAM memory technology.
  • Resistive Random Access memory (ReRAM), the technology being developed by WBT, is non-volatile and similar to Flash Memory (used in computers, cameras, mobile phones, etc) and is comparably fast with respect to Dynamic Random Access Memory (DRAM), which stores data temporarily in the Central Processing Unit (CPU) of a computer and is volatile or temporary. So if a mobile phone uses ReRAM at present (which is not possible now because of non-availability of technology) it is most likely to be functional for days without having to recharge it. ReRAM uses substantially lower energy compared to Flash Memory and DRAM.
  • The company is working on discrete, stand-alone memory which has the potential to replace certain flash memory applications like NOR Flash, with a potential market size of US$2 billion.
  • The company is targeting to utilize ReRAM cells to create a Spiking Neural Network (SNN).
  • The company’s Board consists of several professionals from the semiconductor industry. The Chairman, David Perlmutter served as Executive VP and General Manager of the Intel Architecture Group and was the Chief Product Officer of Intel Corporation. Dr. Yoav Nissan-Cohen’s (who is an Executive Director) career covers nearly 40 years, including as CEO of Tower Semiconductor. He was also instrumental in setting up Saifun Semiconductor which was acquired by Spansion. Finally, Atiq Raza (Non-Executive Director) as the Chairman and CEO of Nexgen, the company which challenged Intel in the domain of microprocessors. He later became COO of AMD and served on its Board of Directors.

With critical technology in the testing phase, the company is expected to announce commercial agreements with manufacturers and distributors within the next three quarters. With a market capitalization of only $65 million in the development and testing phase, there exists a huge potential for the company to grow in value and generate healthier returns in the long-term.

We recommend a BUY on the stock for our investors who are looking at a medium to long term horizon.

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