IQE

LN: IQE

£561.1m market cap

72.05p 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

Total FY18 revenues grew by 1% year-on-year to £156.3m. Wireless revenues benefitted from inventory channels being replenished and customers making last-time buys ahead of the closure of the New Jersey facility. However, photonics revenues were affected by inventory overhang in H118, followed by supply chain disruption caused by OEM product sales softness in Q418. Adjusted profit before tax was depressed by several factors, almost halving to £14.0m. These include currency headwind, production inefficiencies arising from lower VCSEL volumes, the cost of multiple low-margin VCSEL qualification programmes, the cost of staffing the new Newport facility prior to commencing production and a higher proportion of wireless products. Net cash fell by £24.8m to £20.8m at the year-end, reflecting continued investment (£12.0m) in multiple innovative technologies and £30.4m in property, plant and equipment, primarily for the new Newport foundry.

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 21.3 16.7
2018A 156.3 28.4 14.0 1.38 52.2 32.3
2019E 169.9 37.5 20.4 2.04 35.3 16.7
2020E 204.3 55.7 37.4 3.74 19.3 13.0
Last updated on 17/04/2019
Industry outlook

Noting softness in the global handset market, management expects the FY19 recovery to be second-half weighted. This is supported by ramp ups on new VCSEL programmes. Volume production on some of these, including shipments to companies in the Android supply chain, has already started.

Last updated on 17/04/2019
Sector
TMT
Share price graph
Balance sheet
Forecast net cash (£m) 0.1
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual (19.6) 23.2 (39.3)
Relative* (22.0) 13.2 (40.9)
52-week high/low 129.8p/56.2p
*% relative to local index
Key management
Phil Smith Chairman
Drew Nelson CEO
Tim Pullen CFO

Content on IQE