Shares in computer memory company Weebit Nano Ltd (ASX: WBT) have been performing strongly recently, even though the company raised $87 million in new capital at a discount.
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Upside remains
The shares are changing hands for $7.08 at the time of writing, well above the $4.05 per share at which the company raised the new capital, but the team at Pitt Street Research believes the shares could go even higher.
The company is also raising a further $15 million in an offer to its existing shareholders.
The Pitt Street team said the new capital raise brought the company's cash position to $172 million, "making it one of the best capitalised independent IP licensors in the non-volatile memory market''.
They added:
The next phase of Weebit Nano's growth cycle is to scale the commercial model to start generating royalty revenues, which will be the primary driver of cash flow growth over the next 10 years. The $87m placement is being invested across three equal investment buckets to facilitate exactly that.
Pitt Street said the company was investing $25 million apiece across three growth drivers, one of which was the core ReRAM technology.
Pitt Street added:
It's currently starting to look like Weebit Nano holds a first mover advantage as the only publicly listed independent ReRAM IP licensor with signed commercial agreements at the Tier-1 integrated device manufacturer level, a position that, to our knowledge, no direct competitor has yet replicated. For investors looking at the company's trajectory over the next 5 years, we see a credible path to 8 – 10 qualified foundry partners, including its existing foundry customers, alongside 10 – 15 IDMs and between 150 – 200 product companies actively designing Weebit Nano ReRAM into their product and chip manufacturing flows.
Pitt Street said this was when the royalty revenue story will begin to materialise.
We model the first royalty contributions emerging in FY27 as current customers complete qualification and move toward production, with royalties scaling materially post-2030 as production volumes ramp across an expanding customer base. At that point, the business model transitions from the current license and NRE fee dominance into the high-margin, recurring royalty profile that defines the long-term earnings power of the company.
Shares looking like good value
Pitt Street has valued the company using a peer group analysis methodology, as well as looked at the company's value in an M&A scenario.
The Pitt Street team values Weebit Nano at $10.20 per share, up from the previous valuation of $9.74.
The company is valued at $1.73 billion.
