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VCSEL growth underpins revenue upgrade

Update | Technology | 02 Jan 2018

IQE’s pre-close trading update noted that management expects FY17 revenues to be ahead of market expectations. Noting that the upgrade is driven by delivery of volume epitaxy on a programme that we infer is the new iPhone X, a programme which will continue throughout FY18, we raise our revenue estimates for both FY17 and FY18, but keep EPS numbers unchanged as the proportion of licence revenues in the mix is lower.


Funds raised to support VCSEL ramp-up

Update | Technology | 14 Nov 2017

IQE has announced its intention to raise up to GBP 95.1m (gross) through a placing of up to 67.9m new shares at 140p/share. The funds will enable IQE to expand capacity to support multiple VCSEL volume ramp-ups from FY19 onwards. We expect the share issue to be earnings neutral in the near term, and are encouraged by this signal of confidence from management as it prepares for the next step change in output.

Jackpotjoy plc

An attractive deleveraging bet

Outlook | Travel & Leisure | 14 Nov 2017

Jackpotjoy plc (JPJ) is the clear leader in the c £800m UK bingo-led market, with exceptionally high EBITDA margins and strong cash flow. The group's balance sheet is simplifying following a major earnout payment and we expect it to reach 2.0x net debt/EBITDA in 2019. With four sets of strong quarterly figures under its belt, JPJ's shares have risen 42% since the January listing in London. Nonetheless, at 7.9x P/E, 8.2x EV/EBITDA and 11.7% free cash flow yield for 2018e, the stock still trades at a significant discount to peers and we believe the re-rating will continue as value steadily transfers from debt to equity.


Photonics - the next growth wave

Outlook | Technology | 21 Nov 2016

IQE's ability to apply its epitaxial IP to multiple market segments enabled it to deliver strong profit growth during H116 as the business continues to diversify revenues. This diversification is set to continue, with technology innovations delivering strong growth in photonics applications and taking IQE into new segments such as the high-growth power electronics market. We see scope for further upward re-rating driven by continued growth in photonics sales.


Start of mass market VCSEL ramp-up

Update | Technology | 26 Jul 2017

IQE’s pre-close trading update notes a 16% year-on-year increase in wafer revenues in H117, driven by strong double-digit growth in photonics and currency tailwinds. Importantly, the photonics growth heralds the start of a mass-market ramp up in VCSEL (vertical cavity surface emitting laser) wafers for consumer applications, encouraging management to proceed with plans to substantially expand capacity ahead of anticipated demand in H218. We make modest upwards revisions to our estimates, noting the potential for further upgrades as there is greater clarity on photonics volumes.


Photonics driving second growth wave

Outlook | Technology | 18 Sep 2017

Towards the end of H117 one of the numerous development programmes for photonics applications that IQE has been working on moved to volume production. The programme, which we infer relates to 3D sensing in the iPhone X, potentially has a transformational impact on IQE’s performance. Until there is clarity on the rate of roll-out of the new phone however, our estimates, which are unchanged from the trading update in July, model a cautious ramp-up in IQE’s epitaxy sales. The share price is looking for performance substantially ahead of this, which our scenario analysis suggests is achievable. Importantly, even if demand for the iPhone X is muted, IQE is engaged in multiple photonics development programmes with the potential to generate transformational levels of growth.


Photonics the star of the show

Update | Technology | 21 Mar 2017

IQE's diversification strategy delivered a 17% jump in adjusted profit before tax during FY16. Strong growth in photonics revenues was a key element of this improvement. This was boosted by a return to growth, albeit modest, in the wireless sector and weak sterling. We revise our FY17 estimates upwards to reflect the progress made on customer qualifications for photonics applications, and we introduce FY18 estimates.


Photonics growth supports upgrades

Update | Technology | 16 Dec 2016

IQE has announced that it will exceed current market expectations for both FY16 revenue and adjusted operating profit. This is primarily driven by strong growth in the photonics business, with a helping hand from sterling’s weakness, and highlights the benefits of IQE’s diversification strategy. We upgrade our FY16 and FY17 estimates, while maintaining a conservative stance and raise our valuation range from 40-45p to 45-49p.


Executive Interview - IQE

Edison TV: | Technology | 29 Sep 2016

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, power electronics and CPV solar cells.


Photonics - light from a rising star

Update | Electronics & Electrical Equipment | 13 Sep 2016

IQE's diversification strategy has delivered a 71% jump in adjusted profit before tax during H116. Strong growth in photonics revenues was a key element of this improvement. This was boosted by a return to growth, albeit modest, in the wireless sector and contribution from licence income. We leave our estimates broadly unchanged, noting that this further confirmation of growth through diversification should support a continued upwards re-rating of the shares.


Revenue diversification driving growth

Update | Electronics & Electrical Equipment | 21 Jul 2016

IQE's ability to apply its epitaxial IP to multiple market segments is expected to deliver year-on-year revenue growth of over 15% for H116. In yesterday's trading statement, management states that the group is on track to achieve full-year expectations. We leave our estimates unchanged, noting that this confirmation of growth through diversification should help catalyse an upwards rerating of the shares.


Diversification delivers growth

Update | Electronics & Electrical Equipment | 22 Mar 2016

IQE's diversification strategy enabled it to deliver growth in profits and sales during FY15 despite weakness in the wireless market and associated destocking. Non-wireless sales accounted for 30% of revenues compared with 20% in FY14. The acquisition of exclusive licensing rights for gallium nitride-on-silicon (GaN-on-Si) technology from Translucent and formation of JVs in the UK and Singapore have laid the foundations for new revenue streams, which have already benefited the FY15 results.