IQE

LN: IQE

£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
Sector
TMT
Share price graph
Balance sheet
Forecast net debt (£m) 15.2
Forecast gearing ratio (%) 5
Price performance
%
1m
3m
12m
Actual 6.5 23.9 23.1
Relative* 5.3 20.3 18.3
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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