FY20 revenues in line with management guidance

Riber 2 February 2021 Update
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Riber

FY20 revenues in line with management guidance

FY20 revenue results

Tech hardware & equipment

2 February 2021

Price

€1.47

Market cap

€31m

Net debt (€m) at end June 2020

0.5

Shares in issue

21.0m

Free float

50.0%

Code

RIB

Primary exchange

Euronext Growth Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(4.2)

5.0

(23.8)

Rel (local)

(3.0)

(10.1)

(19.0)

52-week high/low

€2.04

€1.10

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

FY20 results

26 April 2021

Analyst

Anne Margaret Crow

+44 (0)20 3077 5700

Riber is a research client of Edison Investment Research Limited

Riber has announced that FY20 revenues will total €30.2m, which is in line with its guidance of around €30m and our estimates. The year-end order book is around half the prior year level, reflecting delays in customers signing contracts and difficulties obtaining export licences. We therefore leave our FY20 estimates broadly unchanged but cut our FY21 revenue estimate by 9% and EPS estimate by 56%.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

31.3

2.0

0.07

0.05

21.0

3.4

12/19

33.5

1.8

0.06

0.03

24.5

2.0

12/20e

30.2

0.0

0.00

0.03

N/A

2.0

12/21e

29.1

0.9

0.03

0.03

49.4

2.0

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

FY20 sales affected by export licence issues

FY20 revenues were €3.2m lower year-on-year at €30.2m. Ten MBE systems were shipped compared with 12 in FY19, though the FY19 total included two MBE systems where deliveries had slipped into Q119. As expected, evaporator sales were minimal (€0.3m), compared with €1.0m in FY19, as the pause in investment in the OLED screen industry continued. Sales of services and accessories jumped by €2.3m to €11.7m, reflecting management’s stated strategy of growing this activity. Total revenues would have been over €31m had the French government not refused export licences for R&D systems and certain types of spares to China.

Export issues also affecting order book

At €14.4m, the FY20 year-end order book was €14.3m lower than a year previously. Management attributes this to the government’s refusal to grant export licences worth around €13m. In addition, while enquiry levels have been high, customers have been slow to sign contracts given the economic uncertainty. The FY20 year-end order book contained only two MBE systems, both for R&D activity. One was from a European customer for research into opto-electronics components, probably LiDAR, for the automotive industry, the other an Asian customer. In January Riber received an order from an Asian customer for use in research including telecom lasers for fibre optical networks.

Valuation: Trading at a discount to peers

Riber is trading at a discount to its peers on both prospective EV/sales and EV/EBITDA multiples. While some discount for its relatively small size and low free float is justified, the size of the discount (16.6x for Riber vs 23.4x for our year 1 EV/EBITDA sample mean) is, in our opinion, unwarranted. This gives ample scope for share price appreciation provided investors gain confidence that orders for MBE systems will pick up despite export issues and the economic uncertainty caused by the coronavirus pandemic and that management will be able to push Riber’s margins closer to those of its peers.

Estimate revisions

Riber’s manufacturing facility has remained operational throughout the COVID-19 pandemic. Because Riber’s MBE systems are used in research on new materials and for the production of electronic and optoelectronic devices used in communications networks, global demand for which is strong, enquiry levels from potential and existing customers in Europe and Asia remain high. Citing the current sales pipeline, management is confident that order intake will pick up later in FY21, though this will result in revenues being heavily weighted towards the second half.

Exhibit 1: Changes to estimates

€m

FY19

FY20e

FY21e

Actual

Old

New

Change

Old

New

Change

Production MBE systems (units)

7

4

4

0.0%

5

3

-40.0%

R&D MBE systems (units)

5

6

6

0.0%

4

6

50.0%

System revenues

23.0

16.8

18.2

8.5%

16.6

15.3

-7.6%

Evaporator revenues

1.0

0.2

0.3

50.0%

1.6

0.3

-80.6%

Service revenues

9.4

12.6

11.7

-7.1%

14.0

13.5

-3.6%

Total revenues

33.5

29.6

30.2

2.1%

32.1

29.1

-9.4%

PBT

1.8

0.0

0.0

0.0%

2.0

0.9

-56.4%

EPS (€)

0.06

0.00

0.00

0.0%

0.07

0.03

-56.4%

DPS (€)

0.03

0.03

0.03

0.0%

0.05

0.03

-40.0%

Net cash at year end

5.3

4.0

0.0

N/A

6.4

1.1

-82.7%

Source: Company data, Edison Investment Research

We have made very minor changes to our FY20 estimates, bringing the revenues in line with the recent announcement.

We have made the following changes to our FY21 estimates:

We change the mix of production and R&D MBE systems delivered in favour of lower-value R&D systems.

While management has maintained contact with its customers, giving potential for €1.6m of evaporator revenues related to the photo-voltaic industry, we now treat this as upside to our forecasts. Instead, we model FY21 evaporator sales at FY20 levels.

We model a small reduction in service revenues as the year-on-year growth is from a lower base.

The change in product mix to a substantially higher proportion of service and spares revenues raises the gross margin.

We reduce our DPS estimate so that it is covered by earnings and to conserve cash given that our revised estimates show significantly less net cash at the end of FY21 than modelled previously.

We model a substantial increase in working capital during FY20 to reflect a lower order-book at the end of FY20, and hence lower levels of pre-payments, as well as higher levels of inventory.

We have not cut levels of investment in either capital equipment or capitalised R&D because the French government has provided a €6m loan to support these activities.

Valuation

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 continues to trade at a discount to both peers with respect to prospective EV/sales and year 2 EV/EBITDA multiples. While some discount for relatively small capitalisation, lower margins and low free float is justified, the size of the discount (eg year 1 EV/EBITDA is 16.6x for Riber vs 23.4x for the mean of our sample) is, in our opinion, unwarranted. This gives ample scope for share price appreciation provided investors gain confidence that orders for MBE systems will pick up despite export issues and the economic uncertainty caused by the coronavirus pandemic and that management is able to address the late deliveries and warranty issues that affected FY18 and FY19 reported profits and push Riber’s margins closer to those of its peers.

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

1,752

5.5

4.8

34.2

24.3

59.4

41.5

41.7

19.9

Veeco

760

2.1

1.8

12.6

10.4

21.1

16.8

43.6

17.8

Mean

3.8

3.3

23.4

17.4

40.2

29.1

Riber

31

0.8

0.9

16.6

10.8

N/A

49.4

35.2

8.1

Source: Refinitiv, Edison Investment Research. Note: Priced at 1 February 2021


Exhibit 3: Financial summary

€m

2018

2019

2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

31.3

33.5

30.2

29.1

Cost of Sales

(19.6)

(23.2)

(21.1)

(18.9)

Gross Profit

11.7

10.3

9.2

10.2

EBITDA

 

 

3.3

2.5

1.5

2.4

Operating Profit (before amort. and except.)

 

 

2.2

1.8

0.0

0.9

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

Exceptionals

(2.2)

(0.9)

0.0

0.0

Share-based payments

0.0

0.0

0.0

0.0

Reported operating profit

0.0

0.9

0.0

0.9

Net Interest

(0.2)

0.0

(0.0)

(0.0)

Profit Before Tax (norm)

 

 

2.0

1.8

0.0

0.9

Profit Before Tax (reported)

 

 

(0.2)

1.0

0.0

0.9

Reported tax

0.5

0.1

0.0

(0.2)

Profit After Tax (norm)

1.4

1.3

0.0

0.6

Profit After Tax (reported)

0.3

1.1

0.0

0.6

Average Number of Shares Outstanding (m)

20.8

20.8

20.8

20.8

EPS - basic normalised (€)

 

 

0.07

0.06

0.00

0.03

Dividend (€)

0.05

0.03

0.03

0.03

Revenue growth (%)

2.5

7.0

0.0

0.0

Gross Margin (%)

37.5

30.8

30.3

35.2

EBITDA Margin (%)

10.4

7.6

5.1

8.1

Normalised Operating Margin

7.1

5.4

0.1

3.0

BALANCE SHEET

Fixed Assets

 

 

9.5

11.4

11.1

10.8

Intangible Assets

1.9

2.6

2.6

2.6

Tangible Assets

4.8

5.1

4.8

4.5

Investments & other

2.8

3.7

3.7

3.7

Current Assets

 

 

28.2

26.8

28.6

28.6

Stocks

15.3

11.5

12.4

11.6

Debtors

8.8

8.0

8.3

8.0

Cash & cash equivalents

3.0

5.9

6.6

7.8

Other

1.2

1.3

1.3

1.3

Current Liabilities

 

 

(17.3)

(17.3)

(13.4)

(13.0)

Creditors

(11.4)

(13.0)

(9.1)

(8.8)

Tax and social security

0.0

(0.0)

(0.0)

(0.0)

Short term borrowings

(0.4)

(0.2)

(0.2)

(0.2)

Other

(5.4)

(4.1)

(4.1)

(4.1)

Long Term Liabilities

 

 

(1.3)

(1.7)

(7.7)

(7.7)

Long term borrowings

0.0

(0.4)

(6.4)

(6.4)

Other long term liabilities

(1.3)

(1.3)

(1.3)

(1.3)

Net Assets

 

 

19.2

19.2

18.7

18.7

CASH FLOW

Op Cash Flow before WC and tax

4.2

2.5

1.5

2.4

Working capital

(5.3)

4.2

(5.1)

0.8

Exceptional & other

(1.7)

(0.3)

0.0

0.0

Tax

0.0

0.0

0.0

(0.2)

Net operating cash flow

 

 

(2.8)

6.4

(3.5)

3.0

Capex

(0.8)

(1.6)

(1.2)

(1.2)

Acquisitions/disposals

0.0

(0.2)

0.0

0.0

Net interest

(0.0)

(0.0)

0.0

0.0

Equity financing

(0.5)

0.1

0.0

0.0

Dividends

(1.0)

(1.0)

(0.6)

(0.6)

Other

0.0

(0.4)

0.0

0.0

Net Cash Flow

(5.2)

3.3

(5.4)

1.2

Opening net debt/(cash)

 

 

(7.4)

(2.5)

(5.3)

0.0

FX

0.0

0.0

0.0

0.0

Other non-cash movements

0.2

(0.4)

0.0

0.0

Closing net debt/(cash)

 

 

(2.5)

(5.3)

0.0

(1.1)

Source: Riber, 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.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

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

General disclaimer and copyright

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.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

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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