- Chipmaker weighs full sale of Taiwan unit after planned IPO
IQE has launched a strategic review of its assets in efforts to bolster its capital position, as a sluggish recovery in key markets continues to weigh on the British chipmaker.
The Cardiff-based firm, which makes epi-wafers for use in laser hair removal and facial recognition sensors in iPhones, told shareholders on Monday it expects revenues to come in flat year-on-year at around £115million.
It had previously flagged moderate growth for the year after returning to profit in the first half.
IQE said it is ‘continuing to see a slower than anticipated recovery in key sectors driven by weak consumer demand in end markets’.
It now expects full-year adjusted core profits to come in at £5million for the 12 months to 31 December, well short of the £12.5 million forecast by analysts.
IQE shares were down 6 per cent to 10.04p by midmorning, having lost more than half their value over the last year.
IQE makes epi-wafers for use in laser hair removal and facial recognition sensors in iPhones
The group said there is ‘significant value in IQE that is not currently reflected in its market capitalisation’ of roughly £100million.
In response, IQE is launching a ‘comprehensive’ strategic review of its asset base to ensure it has ‘a strong capital position to further invest’ in its core operations.
Mark Cubitt, executive chair of IQE, said: ‘The impact of the slow pace of recovery in the semiconductor industry can be seen across the sector and is reflected in our revenue expectations.
‘We remain committed to delivering maximum value for our shareholders and serving our customers. We are confident in IQE’s long-term prospects and inherent value.’
It follows the sudden departure of chief executive Americo Lemos last month.
The strategic review will include a broadening of the proposed initial public offering of its Taiwan operations to include ‘all strategic options’, including a full sale – rather than a minority stake it would have retained under previous plans.
Analysts at Peel Hunt estimate the full sale of IQE’s Taiwan operations could represent an enterprise value of £160million £190million – compared to a market cap of £103million and gross non-current asset value of £205million as of June.
The broker said: ‘We believe the strategic review will result in a leaner company, more focused on the future, with a stronger balance sheet.’
A weak recovery in IQE’s key markets has continued to weigh on its share price
IQE also announced on Monday it was negotiating a proposal from key shareholder Lombard Odier over ‘short-term financing to help IQE navigate the ongoing market softness’.
Lombard Odier has offered to extend up to £15 million via a convertible loan note with a conversion price of 15p per share, reflecting ‘a strong demonstration of Lombard Odier’s confidence in the embedded value within the Group’, IQE said.
Peel Hunt said the financing offer ‘underscores the potential value to be unlocked’.
It added: ‘Given the evolving situation, we will reassess our [IQE target price] and reinstate a recommendation in due course.
‘We remain at Under Review. Clearly, risks have been lowered.’
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