Nanofilm eyes new CEO by end of year

Nanofilm Technologies International, whose shares took a hit following disappointing results and sudden management changes, expects to hire a new chief executive by the end of this year, said founder Shi Xu in an interview with The Straits Times.

Dr Shi, 57, who became interim CEO in June, said this will allow him to focus on spotting suitable merger and acquisition (M&A) targets that will enable Nanofilm to achieve the scale it needs to support growth projections. "As growth is now getting faster, I need a management team that has enough drive and a longer-term runway to take things forward."

Mr Lee Liang Huang, Nanofilm's former CEO, is above 60 and was no longer fully committed to the job, Dr Shi added.

Nanofilm's initial public offering (IPO) in October last year was the largest on the Singapore Exchange since 2016, raising $470 million.

But things took an unexpected turn last month when the firm's chief operating officer Ricky Tan suddenly resigned, two months after Mr Lee left the company.

Nanofilm had also reported a 2.3 per cent year-on-year drop in earnings to $18.1 million for the first half of the year, citing higher costs. This was on the back of a 24.2 per cent increase in revenue to $96.6 million for the period.

That disappointed analysts, some of whom were expecting earnings growth of more than 50 per cent. The company's shares shed a third of their value when the market reopened.

Speaking to ST in his first interview with the press, Dr Shi said that he did not expect the market's response and intends to meet more regularly with investors to provide them with company updates from now on. "While demand is picking up fast, we need to be realistic. We don't have the resources to cope with 50 per cent earnings growth every year."

Investors should instead expect revenue to expand by 10 per cent to 20 per cent annually after Nanofilm completes a restructuring of its management.

With the company reorganised under six business units, Mr Tan was no longer needed to oversee operations, Dr Shi added. "The customers, products, timelines and skill sets are very different across each unit, so we need each team to focus."

Dr Shi has also set higher aspirations for the company: become Singapore's first deep technology firm with "double-digit" annual revenue growth.

Nanofilm makes coatings that protect the components inside camera lenses and even cars from heat damage and corrosion. This extends the lifespan of a product while reducing operational costs for manufacturers.

Dr Shi said: "Our coating technology is developed based on a very deep understanding of industry challenges. It evolves and can be used in multiple sectors and products. This is the breadth and depth needed to become a deep tech company."

In July, Nanofilm announced an agreement to invest in Sydrogen, a $140 million joint venture with Temasek to develop hydrogen technology for generating electricity. The move vaulted the firm's market value to a high of $4.3 billion as its shares surged from its IPO price of $2.59 to peak at $6.53 on July 26.

Last month, Dr Shi made Forbes' Singapore's Richest 2021 list with a net worth of US$1.8 billion (S$2.4 billion).

He cited Nanofilm's investment in Sydrogen as an example of deep tech. "After many years of research, we found our technology worked well in coating hydrogen fuel cells," he said. "Hydrogen technology will drive the global economy for the next few decades."

A science wonk who left China on scholarship for Britain in 1987 at the age of 23, Dr Shi moved to Singapore upon accepting an offer to lecture at Nanyang Technological University (NTU), after earning a PhD in physics at Reading University. He started developing his coating technology - the first of its kind - in 1993, in collaboration with the University of Cambridge under tenure at NTU. This was spun off as Nanofilm in 1999, with the university owning 70 per cent.

Backed by a private equity fund under Standard Chartered Bank, Dr Shi privatised Nanofilm in 2001 for $3 million and received an additional $1 million in cash to develop the company.

Nanofilm's big break came last year, when the Covid-19 pandemic hit. "Capital markets were flooded with cash. It was a good time to conduct our IPO," he said.

In March this year, he and his wife made headlines after buying - in cash - a $128 million good class bungalow in Nassim Road, Singapore's most coveted address.

Dr Shi and his wife now own 53 per cent of Nanofilm but he wants "a more balanced" base of shareholders. "Its not possible to scale if it remains under my family," said Dr Shi, whose daughter is an artist and whose son prefers pursuing other areas of science.

Nanofilm would benefit from more strategic partners at the shareholder level who can help it expand much faster, he said.

Analysts' expectations of the stock have tapered off for now, with local brokerages UOB Kay Hian and DBS Vickers both downgrading their earnings forecasts and recommendations. But CGS-CIMB continues to see better earnings on improved revenue for the second half of this year.

Last month, three substantial shareholders, including two subsidiaries of Temasek, pared stakes in Nanofilm. The company also purchased about four million shares for around $16.5 million in several rounds of share buybacks after prices tanked last month.

Shares of Nanofilm closed yesterday at $4.35.