Stonegate Updates Coverage on BluGlass Limited (ASX:BLG)

DALLAS, TX -- December 13th, 2023 -- BluGlass Limited (ASX:BLG): Stonegate Capital Partners updates their coverage on BluGlass Limited (ASX:BLG).

COMPANY UPDATES

• 2H23 Results: BluGlass ended FY23 with revenues of A$9.5M, an increase of 123% year over year. This was primarily driven by R&D grants of A$8.3M, up 148% from the prior year. Most notable was the addition of revenue from laser diode sales, which the Company did not have in FY22. We expect that BLG will see a significant increase in laser diode revenues over the coming quarters as it increases manufacturing. We believe that BLG is well positioned as a pure play GaN laser provider to grow and capitalize on the GaN laser systems market that is expected to reach $2.5B by 2025.
• Strong Partnerships: BLG has strong partnerships across a number of different institutions, both public and private. On the public side BLG is partnering with Ganvix to develop Vertical Cavity Surface Emitting Lasers (VCSELs) with the goal of bringing commercial viability to green wavelength lasers. The Company is also in partnerships with both the University of Santa Barbara California (USBC) and North Carolina State University (NCSU). The partnership with USBC is to bring visible Distributed Feedback (DFB) Lasers to commercial viability, which are lasers that are very narrow in width and high in purity, leading to uses in highly technical applications. The partnership with NCSU is BLG’s most recent partnership and is funded by CHIPS Act spending. Most recently the NCSU partnership has seen the Company sign a contract worth A$2.6M. It is anticipated that these partnerships will help the Company further develop its portfolio and improve pathways to commercial viability.
• Vertical Integration: In 2022 BLG acquired a purpose-built laser diode fabrication facility located in Silicone Valley. This acquisition quadrupled the wafer capacity and development turns to help meet customer demand. The Silicone Valley facility makes BLG a vertically integrated operation that can be with the customer from design to packaging and testing. By becoming vertically integrated the Company added functionality and increased ASP. This was further improved upon in December of 2023 when the Company acquired contract manufacturer GaNWorks Foundry. This acquisition includes specialty assets that complete the vertical integration of its Silicone Valley facility. This was in concert with the transition of a senior engineer to its Freemont facility to spearhead these new capabilities. The asset transfer is expected to be completed before the end of 2023.
• Current Portfolio: BLG offers a portfolio of lasers spanning several wavelengths, launched in 2023. This initial cohort of wavelengths included violet at 405nm and 420nm as well as blue at 450nm. BLG shows a rapidly progressing improvement curve with devices already rivaling comparable companies’ performance. As the Company continues to innovate, we expect the portfolio to grow and take advantage of the above-mentioned manufacturing capabilities to serve an often-ignored portion of the laser diode market. This also makes BLG well positioned to take advantage of the many macro tailwinds we see on the horizon, one of which is the A$15.0B Australian National Reconstruction Fund discussed in this report.
• Valuation: We use a combination of comparative analysis and DCF analysis frame our valuation for BLG. This arrives at a valuation range of A$0.15 to A$0.19 with a mid-point of A$0.17. At an exchange rate of A$1.52AUD/USD, this is equal to a range of $0.10 to $0.13 with a mid-point of $0.11.