IQE

LN: IQE

£443.2m market cap

55.9p last close

IQE is the leading supplier of epitaxial compound semiconductor wafers globally. The principal applications include radio frequency semiconductors, devices for optical networks, vertical cavity lasers, infrared semiconductors and power electronics.

Investment summary

IQE’s CFO, Tim Pullen, discusses the company’s recent interim results and explains the operational measures IQE has put in place to support growth. He also explains why it is well placed to adapt to shifts in the global electronics supply chain being brought about by US/Chinese trade sanctions. With the infrastructure phase of the capacity-expansion programme nearing completion, he explains why future investment in capacity will be much more linear and discretionary, based on anticipated demand. As a result, supported by recent cost-control measures, the company expects to generate cash in H2. With an increased debt facility in place, management is confident it will not need to raise further capital. Tim ends by discussing how management sees margins evolving and how investors should view the timing of the company’s growth opportunities across multiple different applications.

Y/E Dec
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2017A 154.6 37.1 24.5 3.38 16.5 13.0
2018A 156.3 28.4 14.0 1.38 40.5 25.1
2019E 147.2 22.5 5.4 0.52 107.5 23.6
2020E 179.0 42.9 24.5 2.40 23.3 12.5
Last updated on 13/09/2019
Industry outlook

On the photonics front, IQE has commenced VCSEL production at Newport for a second major customer, this one serving the Android supply chain, and is at the advanced qualification stage on several other VCSEL projects. In addition, the chip customer behind the 2017 VCSEL production ramp-up has extended its current contract until the end of 2021. These developments indicate that IQE will be able to offset loss of production for the major (non-VCSEL) photonics customer fairly rapidly.

Last updated on 13/09/2019
Sector
TMT
Share price graph
Balance sheet
Forecast net debt (£m) 14.7
Forecast gearing ratio (%) 5
Price performance
%
1m
3m
12m
Actual (2.9) (27.4) (36.8)
Relative* (5.1) (28.0) (37.2)
52-week high/low 98.0p/47.6p
*% relative to local index
Key management
Phil Smith Chairman
Drew Nelson CEO
Tim Pullen CFO

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