IQE

LN: IQE

£365.4m market cap

45.9p 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

The breadth of IQE’s technology portfolio and ability to serve compound semiconductor chip customers in the US and Asia puts it in a good position to benefit from rising demand for compound semiconductor applications for 5G and connected devices. The share price has been hit by the shift to Asian-centric supply chains caused by US-Chinese trade tensions, and resultant reductions to management guidance. Although the timing of a recovery is difficult to gauge, we see scope for earnings recovery as IQE secures additional contracts in Asia and leverages its IP portfolio into sustainable profit growth and cash generation.

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 13.6 10.6
2018A 156.3 28.4 14.0 1.38 33.3 20.6
2019E 139.4 9.1 (8.0) (0.82) N/A 52.9
2020E 152.1 20.9 3.0 0.28 163.9 18.8
Industry outlook

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.

Last updated on 16/01/2020
Sector
TMT
Share price graph
Balance sheet
Forecast net debt (£m) 17.6
Forecast gearing ratio (%) 6
Price performance
%
1m
3m
12m
Actual (3.8) (25.9) (23.0)
Relative* (4.7) (30.5) (31.3)
52-week high/low 98.0p/41.8p
*% relative to local index
Key management
Phil Smith Chairman
Drew Nelson CEO
Tim Pullen CFO

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