The recession caught up with wafer materials supplier IQE in the fourth quarter last year when the company began to take a hit from destocking by the big semiconductor chip makers. The good news is that this didn't last long as destocking ended in the first quarter, orders picked up again, and now in the third-quarter trading is back to pre-recession levels.
IQE's bias towards products for cutting-edge communications such as smartphones and third-generation (3G) and advanced wireless systems has offered it some degree of protection and should stand it in good stead now that people want handsets with ever more functions and computer manufacturers want ever faster and more powerful chips. There are also promising growth areas in solar cells and LEDs for lighting while demand for 3G handsets is expected to double by 2012. And IQE should continue to benefit from the trend by chip makers to outsource. At present, half of the $600m (£370m) wireless market is outsourced and IQE has a commanding 30 per cent market share of that.
Broker Edison expects adjusted pre-tax profits of £2.8m and EPS of 0.6p (£3m and 0.7p, respectively, in 2008), rising to £4.8m and 1.1p in 2010.
| IQE (IQE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 14p | MARKET VALUE: | £61.0m | |
| TOUCH: | 14-14.25p | 12-MONTH HIGH: | 16p | LOW: 3.38p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 6p* | NET DEBT: | 76% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 30.2 | -0.71 | -0.16 | nil |
| 2009 | 21.4 | -1.36 | -0.31 | nil |
| % change | -29 | - | - | - |
*Includes intangible assets of £14.3m, or 3p per share | ||||
