Currency in -
Last close As at 09/06/2023
-33.10
▲ 3.95 (13.55%)
Market capitalisation
266m
Research: TMT
IQE has assessed the potential impact on its business of the decision by the US Department of Commerce’s Bureau of Industry and Security to prohibit the sale to Huawei, by certain of IQE’s customers, of products covered by the Export Administration Regulations without obtaining an appropriate export licence. Following discussions across its customer base, IQE estimates that its current maximum risk exposure with regards to this ban is less than 5% of its total FY19 revenue guidance. We therefore leave our estimates and indicative valuation of 91–99p/share unchanged.
IQE |
Impact of Huawei ban is limited and short term |
Trading update |
Tech hardware & equipment |
24 May 2019 |
Share price performance Business description
Analysts
IQE is a research client of Edison Investment Research Limited |
IQE has assessed the potential impact on its business of the decision by the US Department of Commerce’s Bureau of Industry and Security to prohibit the sale to Huawei, by certain of IQE’s customers, of products covered by the Export Administration Regulations without obtaining an appropriate export licence. Following discussions across its customer base, IQE estimates that its current maximum risk exposure with regards to this ban is less than 5% of its total FY19 revenue guidance. We therefore leave our estimates and indicative valuation of 91–99p/share unchanged.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17** |
154.5 |
24.5 |
3.38 |
0.0 |
21.9 |
N/A |
12/18 |
156.3 |
14.0 |
1.38 |
0.0 |
53.6 |
N/A |
12/19e |
169.9 |
20.4 |
2.04 |
0.0 |
36.3 |
N/A |
12/20e |
204.3 |
37.4 |
3.74 |
0.0 |
19.8 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
IQE’s customers are potentially affected in two ways. If they have products containing US-derived IP, these would, theoretically, be barred from shipment to Huawei. In addition, if any individual critical component is barred, then Huawei may be unable to finish manufacturing complete devices and therefore stop purchasing other parts to avoid unnecessary inventory build-up and cash burn. Telecoms operators can switch to offering handsets from alternative vendors relatively quickly. Switching infrastructure vendor takes longer because of the complex product qualification required. Therefore, the ban is expected to cause short-term disruption to the smart-phone supply chain. However, in the longer term the ban will result in a shift in market share for handset and infrastructure vendors but no change in actual market size.
IQE’s dominant position in the outsourced compound semiconductor epitaxy market means that it has supply relationships with multiple non-US (and US) customers. It is therefore relatively agnostic to any mid- to long-term shifts in market share at either component or OEM level. However, in the short term management believes that the ban may result in some delay to orders and temporary destocking in its wireless business. The photonics and Infrared activity is not materially affected.
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Research: Investment Companies
BlackRock Greater Europe Investment Trust (BRGE) has been co-managed by Stefan Gries since June 2017. Since then, there has been a marked improvement in the trust’s investment performance. Gries is constructive on the prospects for the trust, suggesting it provides access to winning franchises in niche, attractively valued companies that ‘just happen to be based in Europe’. In aggregate, BRGE’s portfolio companies have a meaningfully higher return on capital and greater forecast earnings growth compared with the reference index (FTSE World Europe ex-UK), which the trust has outperformed over one, three, five and 10 years. It also offers exposure to the potentially higher-returning emerging markets in Europe.
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