Riber

Emerging from the shadow of coronavirus

Riber 5 October 2021 Update
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Riber

Emerging from the shadow of coronavirus

H121 results

Tech hardware & equipment

5 October 2021

Price

€1.48

Market cap

€31m

Net debt (€m) at end June 2021 (excluding lease liabilities)

1.0

Shares in issue

21.0m

Free float

50.0%

Code

ALRIB

Primary exchange

Euronext Growth Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

1.1

(3.8)

1.7

Rel (local)

4.3

(2.8)

(23.4)

52-week high/low

€2.2

€1.3

Business description

Riber designs and produces molecular beam epitaxy (MBE) systems and evaporator sources and cells for the semiconductor industry. This equipment is essential for the manufacturing of compound semiconductor materials that are used in numerous high-growth applications.

Next event

Q321 revenues

28 October 2021

Analysts

Anne Margaret Crow

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

Riber is a research client of Edison Investment Research Limited

While Riber’s H121 performance was depressed by the lack of MBE system orders during FY20, customer confidence appears to be returning. The resultant increase in order intake points to a much stronger second half, with management forecasting over €30.0m revenues and an operating income of €1.2m for the full year. We are upgrading our FY21 estimates, raising PBT by 27%, while leaving our FY22 estimates unchanged.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/19

33.5

0.9

0.03

0.03

49.3

2.0

12/20

30.2

0.7

0.02

0.03

74.0

2.0

12/21e

30.0

1.1

0.04

0.03

37.0

2.0

12/22e

32.8

1.8

0.06

0.05

24.7

3.4

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Pandemic causes revenue slowdown in H121

As noted at the end of July, Riber’s H121 revenues fell 20% year-on-year to €9.3m because the coronavirus pandemic had caused a slowdown in MBE system orders during H120 and Q320. R&D costs were 46% higher as the company intensified work on projects with long-term partners, so operating losses widened by €1.0m to €1.9m. Together with capital investment in a high-volume system for partner IntelliEPI, these higher levels of R&D were supported by two loans backed by the French government totalling €8.0m, so while net debt (excluding IFRS 16 lease liabilities) increased by €0.8m during H121 to €1.0m at the period end, there was €7.2m cash on the balance sheet at this point.

Order intake supports FY21 estimates upgrade

Having received orders for only three MBE systems during FY20, customer confidence appears to be improving and it is becoming easier for the group to secure licences to export systems to Asian customers. Four orders were placed in H121, two in Q3 and one so far in Q4, encouraging management to issue guidance for FY21 for the first time, forecasting more than €30.0m revenues and an operating income of €1.2m. We therefore upgrade our FY21 estimates, raising PBT by 27%, while leaving our FY22 estimates unchanged.

Valuation: Trading at a discount to peers

At current levels, Riber’s shares are trading at a discount to the mean of its peers (Aixtron and Veeco) with respect to prospective EV/Sales and EV/EBITDA multiples (eg year 1 EV/EBITDA 11.3x vs 16.5x). We believe that this level of discount is justified given Riber’s smaller market capitalisation and lower margins. However, we see scope for share price appreciation if receipt of a major evaporator order or higher than anticipated numbers of MBE system orders, which could be realised if the apparent easing of export controls continues, drive further estimate upgrades.

H121 results

Pandemic causes temporary revenue slowdown

As noted at the end of July, Riber’s H121 revenues were 20% lower year-on-year at €9.3m. This was because the coronavirus pandemic caused a slowdown in MBE system orders during H120 and Q320. Given the long lead times for building MBE systems, this meant that MBE system sales halved year-on-year during H121 to €2.8m as deliveries dropped from three systems in H120, of which two were production systems, to delivery of a single production system in H121. The situation was made worse by the delay of the delivery of an R&D system from June to July because of coronavirus-related travel restrictions. Revenues from services and accessories rose by 8% to €6.4m, in line with management’s intention to grow this category. As expected, evaporator sales were minimal (€0.1m in both H121 and H120), reflecting a trough in investment in the OLED screen industry.

Gross margin reduced by 1.4pp to 27.5% as a result of product mix. Sales and marketing expenses fell by 10%, mainly reflecting a drop in commissions paid to the company’s sales agents. R&D costs were 46% higher as the company intensified work on projects with long-term partners IntelliEPI, IMEC and CNRS-CRHEA. Administrative expenses reduced by 9% because H120 incurred relatively high advisory fees associated with the onset of the coronavirus pandemic and the organisation of two general assemblies. Operating losses widened by €1.0m to €1.9m through a combination of lower revenues and higher R&D expenses. The increase in losses after tax was not as large (an increase of €0.8m to €1.7m) because of the beneficial effect of the revaluation of the US dollar against the euro on receivables denominated in US dollars and lower tax payable.

Liquidity benefits from €8.0m government-backed loans

Net debt (excluding IFRS 16 lease liabilities) increased by €0.8m during the period to €1.0m at end H121. The key factors behind this were a €2.6m decrease in working capital, €0.5m capitalised R&D and €1.9m capital expenditure (€0.3m in H120). The decrease in working capital relates to a reduction in trade receivables connected to lower revenue levels and a jump in prepayments (typically 30–40% of system revenues) from customers for MBE systems that have yet to be delivered. The increase in capital expenditure relates to the delivery in April 2021 of a higher-throughput MBE 8000 system to IntelliEPI in Texas for trial VCSEL production. This system will remain Riber’s property until the trials complete at the end of FY23. During FY20, Riber obtained two loans backed by the French government totalling €8.0m and repayable over a four-year period from FY22 onwards to ensure it could maintain investment in R&D despite cash flow being affected by order delays. This meant that cash at the end of H121 was €7.2m (€8.0m at end FY20) despite the increased investment in R&D.

Outlook

Order intake strengthening substantially

Riber’s manufacturing facility remained operational throughout the COVID-19 pandemic. Because its MBE systems are used in research on new materials and for the production of electronic and optoelectronic devices used in communications networks and 3D sensing applications such as facial recognition, enquiry levels remained high during FY20, even though only three orders were placed during the year, two of which were received in H220. Conversion of enquiries into orders of MBE systems appears to be picking up as customer confidence returns. Four orders were placed in H121, two of which were from customers in Asia for production systems. The June 2021 order book included €10.5m of MBE systems, all for delivery in FY21 which, together with €6.9m orders for services, resulted in a total order book of €17.4m at end H121, compared with €14.4m at end December 2020 and €17.3m at end March 2021. The June 2021 order book total did not include the additional order for a research system announced in July, or the order in September from an Asian customer for a production system worth several million euros, both of which are scheduled for delivery in FY21. The recent order for a research system from the University of Montpellier is for delivery in FY22. The system will be used to develop antimonide based mid-and-long wavelength infra-red photonics materials deposited on silicon and quantum devices. We note that the difficulties which Riber had experienced in obtaining export licences to Asia appear to be easing.

Upgrade to FY21 estimates

Noting the improving order book, management has issued guidance for FY21 for the first time, forecasting over €30.0m revenues and an operating income of €1.2m. We adjust our FY21 estimates accordingly, modelling higher average selling price (ASP) per system to reflect the order of a high-value system in September. The resultant changes to our estimates are summarised in Exhibit 1. Our estimates assume minimal (€0.3m) evaporator sales in FY21, so the lack of orders so far this year for this product category does not affect this element of our forecasts. We leave our FY22 estimates unchanged.

Exhibit 1: Revisions to estimates

€m

2020

2021e

2022e

Actual

Old

New

Change

Old

New

Change

System revenues

18.2

15.3

16.2

6.1%

17.6

17.6

N/A

Evaporator revenues

0.3

0.3

0.3

0.0%

0.3

0.3

N/A

Service revenues

11.7

13.5

13.5

0.0%

14.9

14.9

N/A

Total revenues

30.2

29.1

30.0

3.2%

32.8

32.8

N/A

PBT

0.7

0.9

1.1

26.5%

1.8

1.8

N/A

EPS (€m)

0.02

0.03

0.04

26.5%

0.06

0.06

N/A

DPS (c)

3.00

3.00

3.00

0.0%

4.93

4.93

N/A

Net debt/(cash) at year end

0.3

(0.6)

(0.5)

-5.3%

(2.1)

(2.5)

N/A

Source: Company accounts, Edison Investment Research

Valuation: Resumption of evaporator orders would benefit share price

We base our valuation on a peer multiples approach. We restrict our sample to the two listed companies that are involved in developing equipment for manufacturing compound semiconductors because they benefit from similar growth trends to Riber, rather than the wider semiconductor industry.

Riber’s share price has dropped back from the €2.17 high reached in April following the news that a customer in Asia had placed an order for its fifth production system. At current levels, the shares are trading at a discount to the mean of its peers with respect to prospective EV/Sales and EV/EBITDA multiples. We believe that this level of discount is justified given Riber’s smaller market capitalisation and lower margins. However, we see scope for share price appreciation if receipt of a major evaporator order or higher than anticipated numbers of MBE system orders, which could be realised if the apparent easing of export controls continues, drive further estimate upgrades.

Exhibit 2: Compound semiconductor manufacturing equipment peer multiples

Name

Market cap (€m)

EV/Sales 1FY (x)

EV/Sales 2FY (x)

EV/EBITDA 1FY (x)

EV/EBITDA 2FY (x)

P/E 1FY
(x)

P/E 2FY
(x)

Gross margin 2FY (%)

EBITDA margin 2FY (%)

Aixtron

2,431

4.9

4.6

20.2

18.0

30.0

28.2

41.3

25.7

Veeco Instruments

953

1.9

1.8

12.8

9.9

17.1

14.0

42.9

18.4

Mean

3.4

3.2

16.5

13.9

23.5

21.1

Riber

31

1.0

1.0

11.3

8.9

38.6

22.8

35.0

10.7

Source: Refinitiv, Edison Investment Research. Note: Priced at 30 September 2021

Exhibit 3: Financial summary

€m

2019

2020

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

33.5

30.2

30.0

32.8

Cost of Sales

(23.6)

(21.2)

(19.6)

(21.3)

Gross Profit

9.9

9.1

10.5

11.4

EBITDA

 

 

1.7

2.1

2.8

3.5

Operating Profit (before amort. and except.)

 

 

0.9

0.7

1.2

1.9

Amortisation of acquired intangibles

0.0

(0.0)

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

Reported operating profit

0.9

0.7

1.2

1.9

Net Interest

(0.0)

(0.0)

(0.1)

(0.1)

Profit Before Tax (norm)

 

 

0.9

0.7

1.1

1.8

Profit Before Tax (reported)

 

 

1.0

0.2

1.1

1.8

Reported tax

0.1

0.0

0.0

0.0

Profit After Tax (norm)

0.6

0.5

0.8

1.4

Profit After Tax (reported)

1.1

0.3

1.1

1.8

Average Number of Shares Outstanding (m)

20.8

20.8

21.0

21.0

EPS - normalised (c)

 

 

3.07

2.49

3.83

6.48

Dividend (c)

3.00

3.00

3.00

4.93

Revenue growth (%)

7.0

-9.7

-0.7

9.1

Gross Margin (%)

29.6

30.1

34.8

35.0

EBITDA Margin (%)

5.0

7.0

9.2

10.7

Normalised Operating Margin

2.7

2.4

3.9

5.9

BALANCE SHEET

Fixed Assets

 

 

11.4

11.3

11.3

11.2

Intangible Assets

2.6

2.9

3.2

3.5

Tangible Assets

5.4

5.3

5.0

4.6

Investments & other

3.4

3.1

3.1

3.1

Current Assets

 

 

26.8

29.1

31.0

33.1

Stocks

11.5

14.3

13.9

13.5

Debtors

8.0

5.1

6.6

7.2

Cash & cash equivalents

5.9

8.0

8.8

10.8

Other

1.3

1.7

1.7

1.7

Current Liabilities

 

 

(17.3)

(11.4)

(12.6)

(13.4)

Creditors

(13.0)

(7.9)

(9.1)

(9.9)

Tax and social security

(0.0)

(0.0)

(0.0)

(0.0)

Short term borrowings (excluding lease liabilities)

(0.1)

(0.1)

(0.1)

(0.1)

Other

(4.2)

(3.5)

(3.5)

(3.5)

Long Term Liabilities

 

 

(1.7)

(10.0)

(10.0)

(10.0)

Long term borrowings (excluding lease liabilities)

(0.2)

(8.2)

(8.2)

(8.2)

Other long-term liabilities

(1.5)

(1.8)

(1.8)

(1.8)

Net Assets

 

 

19.2

19.0

19.7

20.9

CASH FLOW

Op Cash Flow before WC and tax

1.7

2.1

2.8

3.5

Working capital

4.2

(5.3)

0.1

0.7

Exceptional & other

0.6

(0.6)

0.0

0.0

Tax

0.0

(0.0)

0.0

0.0

Net operating cash flow

 

 

6.5

(3.8)

2.9

4.2

Capex

(1.6)

(1.5)

(1.6)

(1.6)

Acquisitions/disposals

(0.2)

(0.1)

0.0

0.0

Net interest

(0.0)

(0.0)

0.0

0.0

Equity financing

0.1

(0.1)

0.0

0.0

Dividends

(1.0)

(0.6)

(0.6)

(0.6)

Other

(0.4)

0.5

0.0

0.0

Net Cash Flow

3.3

(5.7)

0.7

2.0

Opening net debt/(cash) excluding lease liabilities

 

 

(2.5)

(5.7)

0.3

(0.5)

FX

0.0

(0.1)

0.0

0.0

Other non-cash movements

(0.2)

(0.2)

0.0

0.0

Closing net debt/(cash) excluding lease liabilities

 

 

(5.7)

0.3

(0.5)

(2.5)

Source: Company accounts, Edison Investment Research


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This report has been commissioned by Riber and prepared and issued by Edison, in consideration of a fee payable by Riber. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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1185 Avenue of the Americas

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This report has been commissioned by Riber and prepared and issued by Edison, in consideration of a fee payable by Riber. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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