£551.1m market cap
69.25p 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 has acquired the third-party shareholdings in its CSDC joint venture in Singapore for a nominal fee. This gives it control of the operation, which is currently loss making, enabling it to restructure the business and focus it on emerging sales opportunities in Asia for molecular beam epitaxy (MBE)-based products. Short term, the deal has a negative impact on earnings. We have reduced our FY19 and FY20 EPS estimates by 8% and 5%, respectively.
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 | 20.5 | 16.1 |
| 2018A | 156.3 | 28.4 | 14.0 | 1.38 | 50.2 | 31.1 |
| 2019E | 147.2 | 22.0 | 4.9 | 0.48 | 144.3 | 30.0 |
| 2020E | 179.0 | 41.4 | 23.0 | 2.29 | 30.2 | 16.2 |
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 14/11/2019
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Balance sheet |
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| Forecast net debt (£m) | 15.2 |
| Forecast gearing ratio (%) | 5 |
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Key management |
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| Phil Smith | Chairman |
| Drew Nelson | CEO |
| Tim Pullen | CFO |
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