London, UK, 28 May 2019

Edison issues initiation on Riber (RIB)

Riber (RIB) is the global leader in molecular beam epitaxy (MBE) equipment. This is used by researchers to develop next-generation compound semiconductor materials used in fibre-optic networks, electronic device displays and sensors for autonomous vehicles as well as for commercial material production. Although the company's revenue profile is lumpy, we believe that demand should be supported by exposure to key structural trends such as demand for faster data, next generation displays and the proliferation and evolution of sensors to support greater automation and intelligence. The company's order book points to a recovery in FY19 following a difficult FY18. The shares trade at a substantial discount to Riber's larger peers who share similar growth drivers.

The share price has halved since June 2018, and Riber is now trading at a discount to both peers with respect to all prospective multiples. While some discount for relative capitalisation and low free float is justified, the size of the discount (year one EV/Sales multiple of 0.7x for Riber vs 2.3x for our sample mean) is, in our opinion, unwarranted. This gives scope for share price appreciation as Riber coverts the strong order book into a sustainable profit recovery.

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