First Property 26/11/15
A property stock finding lots of value in central Europe
IQE, the semi-conductor wafer supplier, has produced an unspectacular set of results for 2003 but management remain upbeat that the pick up in the semi-conductor industry should enable the company to reach break-even in 2004. Having moved down from full listing to Aim in November, raising £ 17.7m via a placing, turnover fell 18% to £17.8m, due primarily to aggressive pricing to attract higher volume outsourcing and the adverse US dollar exchange rate movement, which reduced sales by approximately £1.6m. Pre-tax losses fell to £13.6m compared to £18m last year, which was due largely to non-recurring costs. The company has a strong net-cash balance of £15.7m. While wafer volumes increased 28% to 110,000 wafers, chief executive Drew Nelson stated that IQE is currently only operating at 25% capacity and needs to reach 35% to reach cash break-even. He also reports that the wireless, LED and Silicon markets in which the company supplies to are showing good recovery with the Fibre-optic market still slow but expected to show recovery in the second half. Despite having a strong potential pipeline for contracts with a number of customers near to completing the qualification stage, Nelson admits it has been tough to convince companies to outsource their wafer manufacture. House broker Evolution Beeson Gregory is forecasting a pre-tax loss of £10.1m for 2004 but if the management are right in teir predictions, IQE could be worth a punt.
Market cap: £46.5m
PE Forecast: n/a
Share price: 15p
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