£362.1m market cap
45.5p 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 reduced guidance for FY19 revenues of £136–142m (vs £140–160m previously) reflects primarily the greater than anticipated disruption to its major US wireless customers as a result of the US/China trade war. There is good evidence to support a recovery in the medium term: the qualification of products and tools in the Asian supply chain for both 3D sensing and wireless RF is encouraging, while exposure to 5G remains attractive. However, the timing of a recovery is difficult to gauge and with Q120 expected to be seasonally quiet we downgrade our FY19 and FY20 revenue estimates by 5.3% and 15% respectively, with FY19 EPS reduced from a 0.5p profit to a 0.8p loss and FY20 EPS reduced from 2.3p to 0.3p.
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 | 13.5 | 10.6 |
| 2018A | 156.3 | 28.4 | 14.0 | 1.38 | 33.0 | 20.4 |
| 2019E | 139.4 | 9.1 | (8.0) | (0.82) | N/A | 52.4 |
| 2020E | 152.1 | 20.9 | 3.0 | 0.28 | 162.5 | 18.7 |
Industry outlook
We view the transaction positively despite the estimates downgrade. Firstly, it enables IQE to restructure the operation and reduce losses. Secondly, it enables IQE to focus the development and manufacturing assets on MBE opportunities in Asia that are emerging because of the localisation of Asian technology supply chains in response to the US-China trade war. This includes epitaxy for 5G applications.
Last updated on 21/11/2019
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Balance sheet |
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| Forecast net debt (£m) | 17.6 |
| Forecast gearing ratio (%) | 6 |
Price performance
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Key management |
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| Phil Smith | Chairman |
| Drew Nelson | CEO |
| Tim Pullen | CFO |
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