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RESEARCH: Revasum Inc, Right Products At The Right Time

FYI | Sep 03 2019

Revasum Inc.: Right Products At The Right Time

By Pitt Street Research

Revasum Inc. ((RVS)) provides grinding, polishing and CMP equipment to semiconductor substrate and device manufacturers. With the ongoing proliferation of electronics in our everyday lives, the need for semiconductor devices will continue to grow globally. As manufacturers continue to build capacity, demand for RVS’ tools will grow in tandem.

Investment case: Strong focus and new products to drive high margin revenues

Compared with omnipresent 300mm wafers, the supply of ≤200mm wafers remains strained. This provides a significant opportunity for RVS, which focuses on ≤200mm wafer tools.

Moreover, RVS’ focus on tools for Silicon Carbide (SiC) wafers positions it very favourably to benefit from the increasing use of SiC wafers for high-growth applications, such as electric vehicles (EVs) and 5G infrastructure.

As RVS continues to expand its product portfolio, with a new polisher slated to launch in 2HY19 (on 2nd October) and a new CMP tool to be introduced in 2020, we believe its growth potential is very substantial.

Cyclical upswing expected near term

Many semiconductor and equipment stocks have suffered from a cyclical downturn that started in late 2018. With the industry upcycle expected to commence in the next 6 to 9 months, RVS should witness substantial multiple expansion.

Valuation range of $2.30–2.69 per share

We value RVS at $2.30 per share base case and $2.69 per share bull case (50/50 weight to DCF and peer group P/BV valuation).

We believe that RVS’ strong product pipeline with high Average Selling Prices and a cyclical uptick in demand will lead to significant top line growth and margin expansion.

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