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A public shell with little trading volume recently acquired a fully-operational South Korean touch screen manufacturer. The resulting entity, Sollensys (OTC:SOLS), now sees active trading, so I decided to take a look with the goal of finding an under-recognized and potentially undervalued investment. Below, I explain why I believe Sollensys will generate substantial returns for early investors.
Touch-sensitive technology delivers an engaging user experience that has rapidly found its way into top electronic products ranging from iPhones and iPads to Windows 8 PCs and even new gaming consoles, like the Nintendo WiiU. It is changing our lives by immersing us in a world of interactive potential. And it is creating fortunes for the next great wave of tech gurus. Retail investors, however, have struggled to find a way to tap into this high-growth market. A recently new public company on the verge of a hundred million dollars worth of sales may just change that…
Double-Digit Momentum For The Touch Screen Market
The touch screen module market will grow from an estimated $16B in 2012 to $31.9B by 2018–a CAGR of 12.2%. As of 3Q12, there were 6.4 billion cellular subscriptions globally, a 91% penetration. And 80% of mobile phones are expected to have touch screen capability, which is largely driving the rapid proliferation of smartphones. In November 2012, comScore reported that US smartphone penetration passed the 50% mark and is now only slightly behind the EU’s 55% penetration. Successful application of touch screens in smartphones that enable richer web browsing, gaming, and social networking experiences have made these mobile devices a “no brainer” for consumers.
NPD DisplaySearch estimates that shipments for touch screens used in mobile phones rose 68% to 1.2 billion in 2012. Shipments for touch screens in tablet PCs tripled in 2010 and hit 79.6 million in 2011. NPD DisplayResearch estimates that 190 million will be shipped in 2013. And notebook PC touch capability will rise from a penetration of 2% in 2011 to 8% in 2013.
Sollensys (OTC:SOLS) Could Provide a Great Return
To generate some of the highest market returns, investors should head over to small-cap stocks. One stock, in particular, that I believe could at least double in value is Sollensys (OTC:SOLS), a manufacturer of touch screen sensor technology. Instead of producing, say, one touchscreen layer, the firm produces entire touch sensor modules for prospective clients. This includes touch screen panels (TSPs), LCD displays, and glass, among other parts.
Since many touch screen manufacturers piece together the final product through ordering parts from various companies, Sollensys’ vertical integration greatly improves the supply chain efficiency of its customers. It should be an ideal supplier for OEMs looking for a full suite of touch screen technology solutions.
Ultimately, Sollensys is able to manufacture touch sensor modules as much as three times faster than the competition can. And the company’s products have a 95%+ success rate in passing quality control versus just 60% – 70% for the industry. It owes this margin-improving strength to its quality control mechanism, called “terminator”, which identifies potential defects in products and adjusts the manufacturing process accordingly. In addition, Sollensys is able to assist in pattern design while other producers cannot–a unique core capability that is an incredibly relevant in an increasingly innovative tech world. Currently, a factory is set up in Korea; another one is in China; and yet another one is being built in Guatemala for wide-scale distribution across the Americas.
Supported By Big Dollars, Numbers
What attracts me so much to Sollensys is that it is a company backed by top investors and secular market trends. Powerful bankers in South Korea, like the nation’s leading bank, KB Bank, along with Royal Bridge and Rothdale Partners have placed large bets on the company’s success. And for good reason: the company is likely to have tens of millions in revenue in 2013.
By contrast, competitors have fallen behind. Corning (NYSE:GLW), one of the world’s leading producer of glass found in LCDs, has struggled to perform due to a variety of inventory issues and transitions in market demand. Operating income has fallen from $1.8B in 2010 to $1.7B in 2011 and then to $1.3B in 2012. Even the company’s “breakthrough” product, Gorilla Glass, failed to put an end to this erosion. Not surprisingly, investors have left the company in mass exodus–45% of shareholder value has been erased in the past 5 years.
Where will all of these investors go? While some of them, no doubt, have jumped into Apple due to its unusual low, others are likely to jump into the next great glass and touch screen producer. In my view, Sollensys is well timed in today’s market not just from a consumer standpoint but also from a capital raising and investment standpoint. With plans to create 10 new factories in multiples countries under an international licensing plan, Sollensys is on the steep part of its growth curve and ready to pass on major returns to early investors.
Disclaimer: This article is for general interest and prospective customers who may end up compensating us for work elsewhere. Investors are cautioned to perform their own due diligence. This article’s content came from public information that cannot be guaranteed to be completely accurate.