IQE is the leading global outsource supplier of customized epitaxial wafers to the semiconductor industry.

Their technology is of most advanced like AFM means Atomic Force Microscopy and moves a minuscule cantilever over an objects surface, a sharp tip passes over dips or rises punched in the surface and reads out digital information. This technology is not going to slow down it is going to speed up and has to replace most existing forms of memory storage by virtue of capacity and size.

The future of nano-technology, these tiny/minute robots would need very small processors and most sure strained silicon could provide these.

The low share price is due to uncertainty as to when the cash will run out, but I don't think this will happen as cash is of 12 to 15M and NAV of 30p, and losses are going to drop on the next 3 month and we could have profits on the Q4 2004.

Latest news from the Chairman were" The Group remains confident that it is in a strong position within the outsourcing market, although the protection of its cash position is paramount.
With a broad product portfolio allowing the customer base to use IQE as a 'one stop shop', a large available production capacity and a strong balance sheet, the Board believes the Group will benefit strongly as the overall semiconductor industry recovers and will continue to strengthen its position as the leading outsource supplier of advanced wafer products to the sector. "

Nearly all the recent results have been encouraging. Q4 accounts are being completed (30th Dec 2002). IQE know where they stand, if things had got worse their would have been a trading statement by now, and with Amberwave (IQE's partner) increasing its Asian presence, this is a bullish trend and a good point to pick up the shares @ 4.25p

Intraday

5 month MA and Indicators

big sells today, i wonder why?

Who knows? A fund manager playing it safe in rocky markets probably. The price hasn't budged though.

I remain in and positive, can only see this going one way in the not too distant future. The dollar/pound exchange rate is probably not helping.

I'm staying put too. The whole semiconductor industry has had oversupply issues in the past few quarters and these are beginning to clear. The iPhone comes out this month and is expected to boost the whole high-end mobile market as other companies try to compete with it.

A positive write up in shares magazine today in plays of the week - suggesting the shares could double in the next year.

i have not done any research on the company yet - what are peoples thoughts on the future of rthe company?

The futures bright and the suggestion of the shares doubling in the next year is credible --go for it! (imho of course!)

I've been in IQE from a couple of yrs ago at 11p and have followed these all the way and now is not the time to get out when things are hotting up... I'm holding for now..

IQE
July 25th, 2007 | Market whispers | No comments.

Bridgewell looks at the bullish after hours statement from RF Microelectronics and concludes it must also be good news for IQE.
Broker says: We see this as positive for IQE, which supplies compound semiconductor wafers into the RF semiconductor market, with 3G handset requiring
a little snippet from market insider

substantially more RF semiconductor content than 2G. RFMD also commented that volume production of its integrated Polaris 3 chip is expected to begin commercial shipments in the current quarter.
hile RFMD currently in-sources much of its wafer supply, we believe that it is more likely to use outsourced suppliers, such as IQE for its newer generations of products, enabling IQE to outgrow the wider RF semiconductor market over the medium term.

Kiss of death or for once a TW tip looks good ?

Buy IQE at 16.75p

Says Tom Winnifrith of the UK's top share tips website t1ps.com

The market hates technology stocks (especially those which are not yet profitable). But IQE is on the verge of profitability. With high fixed costs, high gross margins and sales racing ahead. This is THE operational gearing play to back. The shares trade on a 2008 PE of less than 8 and I expect them to double or more within 12 months. At 16.75p IQE is a buy.

What do you associate with Wales? Poor rugby teams harking back to distant glories? Jokes about sheep? Neil Kinnock? That mad bloke who is obsessed with persecuting motorists in the North Wales Police? Whingeing? Take your pick. I should not be too harsh given my daughter's ancestry but believe it or not Wales does possess at least one world leader in an economic field - IQE PLC (IQE). This is an aim listed tech stock so the market pretty much hates it. I suppose if you'd bought shares at 500p just after its dotcom flotation you'd probably hate it too. But...

IQE is (belatedly) getting its act together. It has a solid balance sheet. Its sales are racing ahead as it meets a clear and growing demand. And with high fixed costs and high gross margins, it is about to move into profitability. It is a profitability that will ramp up quickly. In calendar 2008 I see earnings hitting 2.1p and there is no reason why within a few years earnings could not be 5p. The shares therefore trade on a 2008 price earnings ratio of less than 8 and a 2010/11/12 rating of just over 3. For a growth play that is clearly bonkers. Put the stock on a mid-teens price earnings ratio and by next year it will have doubled. If it achieves its full potential it could double again over the following years. My stance, at 16.75p, is "buy" at up to 20p with a one year price target of 33.5p

Incidentally this is not to be confused with IQ Holdings the PLUS stock I own shares in, which is currently on its way to AIM and which is, I should add, a corporate client of RSH, the owner of this website.

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The Business

IQE (which stands for International Quantum Epitaxy) is the world's largest semiconductor wafer manufacturer. It was formed in 1999 by the merger of two leading wafer foundries and floated on AIM in 2000. It is unique in being able to supply wafers based on all of the leading atomic level crystal growth technology platforms. Its products are also used in CD lasers, barcode scanners, digital cameras, laser printers, GPS, bluetooth and pretty much any gadget that emits light. So it has applications in a range of industries; in fibre optics and communications, satellite systems, automotive, DVD, lighting and medical. It employs around 320 people and operates six manufacturing facilities in the UK, the USA and Singapore . IQE also has nine sales offices at major economic centres worldwide. And yes, it has achieved all of this from being based in Wales.

My knowledge of technology is perhaps not what it should be, but I'm reliably informed that within every wireless communication device, such as mobile phones and PDAs (whatever that is), there are microchips embedded with these wafers which are around 100 times the width of a human hair. There are around a dozen companies worldwide that manufacturer and distribute semiconductor wafers to the microchip makers, which in turn sell the completed semiconductors to system providers like Nokia and Samsung. Known as the epitaxy process, the first stage is one of the most critical and demanding steps in the manufacturing chain.

IQE provides a tailor made service for a host of different devices. Outsourcing the epitaxy stage of chip production process improves cost efficiencies for its clients, largely because they don't have the economies of scale and in-house capabilities to make it worthwhile. Thus, it provides a cost-effective and fast time to market with access to large-scale production of new materials and emerging technologies. The outsourcing model itself appears sound. IQE leverages its global purchasing volumes to reduce the cost of raw materials. In this way its outsourced services provide compelling benefits in terms of flexibility and predictability of cost, thereby significantly reducing operating risk for the customer. Orders are specifically tailored and delivered within weeks. I am concerned about the length of the overall sales cycle as discussions over big outsourcing jobs take place at senior management level and represent a major strategic step for the client. The prolonged nature of key wins introduces forecast risk. I should also note that most of IQE's products and raw materials are priced in US dollars and that half of revenues arise from the States, which creates currency risk.

As well as silicon IQE also makes compound semiconductors made from Gallium Arsenide (GaAs). This creates a range of electronic and optoelectronic properties and makes the wafers particularly suited to products which convert light and electricity back and forth such as in lasers, LEDs and detectors. Meanwhile, in the electronics domain, its compound wafers allow electrons to travel much more quickly than in silicon (by a factor of up to ten times) enabling higher frequency, lower noise and more power-efficient systems. All of this is a key feature of the ongoing communications revolution. The group also provides research and development services to create customised materials and contracts out its specialist technical staff.

In its original form IQE was co-founded by current chief executive, Dr Drew Nelson, who received an OBE in 2001 for services to the electronics industry. He has a PhD in Semiconductor Technology and in 1988 he co-founded Epitaxial Products International. When EPI merged with US business QED in 1999, it floated on EASDAQ and made a secondary offering in the LSE (TechMARK) to fund its UK and US expansion. As a result IQE became a member of the FTSE 250 and won the title Company of the Year' at the Welsh Industry Awards. Of course dotcom boom turned to bust but the recovery is now underway...

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Financials

Over the year to 31st December 2006, IQE completed two major acquisitions and established itself as the clear leading supplier of wafers to the global wireless communications industry. Its wafer volumes rose by 68% from 149,000 units to 250,000 units and on the back of this revenues were 55% higher at 32.4 million. Profit margins improved and a gross profit of 2.5 million was recorded. Although still loss-making overall, the EBITDA loss was almost halved to 2.4 million. The loss per share was reduced from 1.36p to 1.21p. Two acquisitions were made during the year with EMD and MBE Technology purchased for 16.7 million. These deals were funded by two share issues raising 15.9 million after costs. Deferred payments of 5.5 million are due by January 2009. I am sure that next year's profitability will fund that earnout.

The ramp up in sales gives me confidence that the company is well on the way to posting consistent profits. With its newly acquired capacity, IQE has the ability to produce 95 million of its product every year this year it will achieve just under 60 million of that. The operation breaks even at 45 million and after that around 50p out of every 1 of revenues falls straight to the bottom line. None of its competitors have that kind of scale. The second largest player is Kopin with annual sales of around 25 million. Fixed costs are currently around 24 million per year and increase only very gradually with additional sales.

IQE is therefore very highly operationally geared and is just reaching critical mass now under current trading. A recent trading statement released by the company announced that it is on track to break into profitability by the end of this year. Revenues grew slightly ahead of market expectations to 22.5 million in the six months to 30th June, and stronger operating margins will contribute further to a positive result. Due to the operational gearing, EBITDA for the half-year will be substantially ahead of market expectations, at around breakeven. All this was achieved despite continuing weakness in the US dollar. IQE enters the second half with positive cash and 5 million of overdraft facilities to ensure its growth is not constrained by working capital needs.


Valuation

The historic numbers seem to be a major reason why IQE isn't liked by the market. The last few years have revealed only losses so it can be difficult to trust in sustained profits that so far don't exist. But with the new capacity and strengthened client base in the wireless sector, I anticipate that IQE can achieve 55-65% of its 95 million worth of capacity plant utilisation during calendar 2007 and that will generate sales of around 58 million and normalised pre-tax profits of 3.3 million. Last year's loss per share of 1.1p will be transformed to earnings of 0.8p.

During 2008 we will see it fulfil the existing capacity further, turning in sales of 71 million. Operational gearing will kick in, causing profits to soar to 8.9 million, creating earnings of 2.1p per share. At the current price of 16.75p, IQE is rated on a measly 2008 multiple of less than 8 times. Now just assume that within a few years, full capacity is reached. With operational gearing kicking in that implies profits of c21 million. With historic losses of 151 million, tax will not be an issue for some time.

The case is strengthened by the expected volume growth in the wireless handset market and the trend towards outsourcing by major suppliers. The diverse client base eliminates risk and the only factor that remains is to demonstrate real cash flow and profitability on a larger scale. Let us view that full capacity 2010/11/12 forecast as a bonus and just focus on 2008. How would a company set to grow its earnings from 0.8p in 2007, to 2.1p in 2008 and heading sharply higher thereafter (with a very high profits to cash conversion rate) be viewed. On a normal basis such a stock would merit a mid-teens rating and that gives me my initial price target of 33.5p. When (as will happen one day) the market falls in love with tech again this stock will be re-rated massively and were that to be on the basis of earnings of 3, 4 or 5p you can see why I am so excited. For now I expect a normal growth rating and am looking just to 2008. My stance, at 16.75p, is "buy" at up to 20p with a one year price target of 33.5p.


Key Data

EPIC: IQE
Market: AIM
Spread: 16.5 - 17

22 August 2007

Good stuff... look at this..

IQE plc


IQE wins multi-year contract as preferred Epi wafer supplier to ANADIGICS Inc.

IQE plc (AIM: IQE, 'The Group') is pleased to announce that its RF Business Unit
has been selected by ANADIGICS Inc. to be their preferred supplier of advanced
GaAs epi wafers. As part of a multi year contract, valued at approximately US
$50 million over the first two years, IQE will provide a wide range of wafer
products which will be used to manufacture leading edge wireless chips for 3G,
WiFi, WiMAX, broadband and set top box applications.

IQE plc also today published its Interim Results for the half year ended 30 June
2007 which show revenues up 80% at constant exchange rates to 26.2m and an
EBITDA profit of 1.3m (H1/2006: EBITDA loss 0.8m).

Dr Drew Nelson, IQE Chief Executive said:

'We are extremely pleased to have been awarded this preferred supplier contract
from one of the world's leading suppliers of advanced chips to the wireless
communications industry. We have been working very closely with ANADIGICS over
the last two years, to support their rapid growth plans.

'This major contract award recognises the unique advantages that IQE can offer
as a pure play wafer supplier, including multi site, multi platform
manufacturing, a complete product range for the wireless communications
industry, significant additional wafer capacity to support the rapidly growing
demands of this and other customers, and the advanced engineering support for
current and future product development that we can provide.'

Dr. Bami Bastani, President & CEO of ANADIGICS said:

'We have chosen IQE as our preferred epi supplier on the basis of their
diligent support of our rapidly growing business over the last two years, and in
recognition of their wafer production strategy which gives us confidence that
they can fully support our aggressive growth plans over the next few years. We
are very happy to have concluded this agreement with IQE.'

22 August 2007


IQE plc

Global wireless strategy drives IQE to operational profitability

IQE plc (AIM: IQE, 'the Group'), the leading global supplier of advanced wafer
products and services to the semiconductor industry, announces its Interim
Results for the half year ended 30 June 2007.

HIGHLIGHTS

Revenues up 62% at 23.7m (H1/2006: 14.6m), despite the impact of an
adverse USD exchange rate. Revenue up 80% at constant exchange rates to
26.2m.

Gross profit up 206% at 3.9m (H1/2006: 1.3m)

EBITDA profit 1.3m (H1/2006: EBITDA loss 1.1m before exceptional gain)

Operating profit 0.1m (H1/2006 operating loss 1.8m before exceptional
gain)

Cash generated from operations 0.4m (H1/2006 outflow 3.4m)

Net cash outflow 2.8m (H1/2006 outflow 5.1m)

Half year cash balance 1.3m (H1/2006 1.2m)

Acquisitions made during 2006 integrated smoothly and contributing
strongly

Also announced today; a multi-year preferred supplier agreement signed
with an existing customer, one of the leading wireless chip manufacturer,
expected to be worth at least $50m over first two years - see separate
statement

Relocating to larger state-of-the-art facility in Singapore to enable
significant future capacity expansion in Asia Pacific

Major R&D programme secured worth $4m


Dr Drew Nelson, IQE Chief Executive, commenting on the results said:

'Continued strong growth in the global wireless marketplace combined with a
shift towards high-end, fully-featured handsets, high speed wi-fi and satellite
communications systems, all of which use increasing amounts of our products,
have driven revenues ahead of expectations during the first half of the year.
This is despite the impact of a slow start in January and February and a weak
dollar.

'Our position in the wireless market was substantially bolstered by the two
major acquisitions made during 2006. This has positioned IQE as the clear
leader in the supply of wafer products to the global wireless communications
industry as confirmed by Strategy Analytics. We have also today announced the
award of a very substantial, multi-year, preferred supply agreement with one of
the world's largest wireless chip manufacturers, worth in total at least $50
million over the next two years.

'I am extremely pleased to announce the Group's move into operating profit as a
result of the substantially increased revenues and strong operational gearing.
This is a key milestone in our continuing progress and clearly demonstrates the
strength of the business model. As more customers become cross qualified at our
various manufacturing locations worldwide, we will be able to leverage our
additional manufacturing capacity, which we expect will result in continued
strong growth.'

WHAT' S RSI.

Results out today look really impressive.
What chance for a big rebound?
SHARES have long been a big fan

Has anybody got any clues as to why IQE are being sold at a discount at present. Can't find anything bad to say about the company, future looks VERY rosy so I am a tad puzzled.

I'd stay in and wait....

It's the market....nothing to worry about... this'll be a solid performer when the market finally picks up !

I was in IQE last yr and made a little bit on it. If I had sum spare funds available I'd go in again at these levels and expect to double from here ! (imho/dyor)

Yep, I think you may be right Skyhigh. Was only holding a small, free, holding following a trade some time ago but added a few more today when I found the shares were being offered at a small discount to quoted price; seemed too good an opportunity to miss. Time will tell!

Hi

Can't believe this doesn't get a mention on here. Went from 3p at the height of the downturn to 14.75 today.

I know, been a great run, was in from 5p.

I got in at 9p. Been in twice before over the last couple of years and made a profit both times :-)

queen1, With you on this one, also in at 9p, again having been in and out in the past. Maybe, 20 to 25p for an exit this time?

25p would be good Ray A. Recommended as the only buy in Shares sector of the week article last week. Hopefully they're right on this one!