Iqe Share Discussion Threads

[momentum1] 29/10/2017 21:24

Trading update in 6 Weeks ish. Christmas orders etc. Going to be a very exciting period for shareholders

[mad foetus] 29/10/2017 21:13

poombear,
Thanks for your very helpful post. Where I struggle is with: "I have stripped Apple VCSEL revenue separately and based it on 40m units @60p a pop. Profit margins are based on H1 2017."

I find it intellectually very difficult to square our production of a wafer, which is sold to a third party at a fixed price, with a figure based on the value of each underlying sale of an iphone. It seems to rely on a number of assumptions about the efficiency of the chip provider to use our wafers effectively. Presumably, if, as has been suggested, the chip providers are having difficulty producing the right VCSEL's, they may be using more of our wafers to produce the same number of Apple acceptable VCSELs and thus our profits per phone could be higher? Or am I going insane? I would like a detailed IMS to put me on the straight and narrow again!

[hitsha1] 29/10/2017 21:07

Get ready to make lots of dosh soon until March👍

[hitsha1] 29/10/2017 21:05

Sorry Crunk I think your time scale devide by 4, I think anyway, also soon we could be experiencing irrational exuberance market, so it could end up much higher, me think anyway

[momentum1] 29/10/2017 21:00

Retest of all time highs and beyond given the coverage we have had this weekend. £2 by end of the week? We could be at that by Wednesday! Fill your boots

[sheep_herder] 29/10/2017 20:02

59 days, 2 hours, 36 minutes and counting..

[steptoes yard] 29/10/2017 19:05

The plot thickens.

[poombear] 29/10/2017 18:42

Bocase, Crunk, my numbers are based on the segmented operating profit (and included license rev), you need to add the central corporate costs to get the adjusted profit number and also finance costs and non cash accounting charges to get PBT. So EPS should not be calculated from my numbers above.

[bocase] 29/10/2017 17:32

Crunk:

Working on Poombear's figures too give an almost identical valuation. So your conclusions coincide which is good to see.

[thecrunk] 29/10/2017 17:29

at Poombear. You came to a very similar revenue figure as I did.

your 40m profit gives you an EPS of 6 which is in the right ball park I would think.

I guess all we can do now is wait and see but the next 60 days will certainly be interesting starting with:

1- Lumentum earnings

2- Apple Earnings

3- Shorters maybe having to get out of IQE

[thecrunk] 29/10/2017 17:29

at Poombear. You came to a very similar revenue figure as I did.

your 40m profit gives you an EPS of 6 which is in the right ball park I would think.

I guess all we can do now is wait and see but the next 60 days will certainly be interesting starting with:

1- Lumentum earnings

2- Apple Earnings

3- Shorters maybe having to get out of IQE

[thecrunk] 29/10/2017 17:24

Well looking at some roughly similar market cap companies on the AIM

Purple Bricks has a market cap of 946.03 million and H1 2017 revenue of 27.99m

Blue Prism has a market cap of 870.33 million and H1 2017 revenue of 9.35m (insane)

IQE has a market cap of 988.38 million and H1 revenue of of 70.37m

If we were valued by the same as people who buy Blue Prism shares our current share price should be around 8 quid.

On most metrics IQE is significantly undervalued relative to mile high valuations on similar market cap companies on the AIM.

When it comes to valuation as has been said before what is really important is 2018 onwards and it looks probably that EPS and revenues for 2018 onwards may be significantly higher than what is priced into the current price.

This is a company that is valued on future value of current non existing revenue streams but highly likely to come online revenue streams. (with the exception of wafers which is pretty much known to be online now). Quite similar to Blue Prism actually which currently has a ridiculous valuation and is a company I would not touch with a barge pole.

I think 2017 EPS will exceed expectations. You are looking a 6-8p.

My guess is that you will see a share price of 160 again within 60 days. 200 within the next six months and then probably 300 in the next 24 months.

Unless there is a buyout. There are around 16m shares that shorter need to buy bay shortly.

IMHO there will be a situation in six months’ time whereby every new moderate to high end smart phone to come out H2 2018 will have 3D recognition and Mr Market will know that 60-70% of the wafers come from wales. Besides all the revenue lines. I can see this being a 5 Billion market cap company in 3 years very easily.

So x5 return over the next three years. To me when you look at what else is around like your purple bricks and Blue Prisms this company is a diamond in the rough. If they simply graduate to the main market they will hit 5 Billion very easily.

I don’t mind being ridiculed for this opinion but do all spare me a thought in 3 years’ time.

If the share price is not 160 in 60 days I shall leave this message board and you can all laugh at me.

A lot is going to happen over the next 30 days. However the next big re-rating will occur again when the Galaxy S9 is announced and it has the same 3D facial recognition tech as I Phone X.

This is without talking about wireless at all.

[bocase] 29/10/2017 17:18

Poombear:

Thank you for your analysis. I am just trying to see how that would convert to EPS if your figures are correct but I might be missing something. (I am not an accountant - trees and hedging are my speciality) so maybe someone can put me right if I am barking up the wrong tree.

Using the 2017 H1 figures we have a profit for the period of £7.1m and and an EPS (adjusted fully diluted) of 1.35p. That implies the number of shares in issue (or used in that calculation)is £7.1m/0.0135 or 52,592,592

Applying that to your projected profit gives an EPS of 7.66p which on the current PE ratio of 50 would imply a share price of £3.83 or on a very modest PE ratio of 25, a share price of £1.91. Somewhere in that range may be reasonable or even conservative given the growth rate.

[poombear] 29/10/2017 16:07

Crunky, few I did post my attempt at FY 2017 revenue back in September, so there has been some discussions on revenue in the last 6 months.

poombear14 Sep '17 - 07:29 - 6634 of 8123 5 0 Edit
Sorry I did post this yesterday and based the Apple unit revenue on 25p per unit, this assumes per unit revenue of 60p, similar to Peel Hunt mid case. As not one person commented I thought I would try again, as there was a lot of noise yesterday.

Been playing around in Excel projecting H2 2017 figures, and using growth figures (over H1) of 5%, 35% and 15% for wireless, Photonics and infrared respectively.
I have stripped Apple VCSEL revenue separately and based it on 40m units @60p a pop. Profit margins are based on H1 2017. No idea how people manage to post in rich text, so formatting may screw t up, but interested to hear what others think as we seldom look at numbers on here?

IQE
H1 2017 H2 2017
Unit Revenue Profit Margin/FY Unit Revenue Profit
Wireless 47,257 7,298 15.44% Wireless 49,620 7,663
Photonics 15,867 6,451 40.66% Photonics 21,420 8,709
Infrared 5,594 1360 24.31% Infrared 6,433 1,564
CMoS ++ 702 -977 -139.17% CMoS ++ 702 -977
License 1000 1000 100.00% License 1000 1,000
Solar 0 0 Solar 0 0
Power 0 0 Power 0 0
Apple 0 0 30.00% Apple 24000 7,200

H1 FY Total
Revenue 70,420
Profit 15,132
Margin 21.49%

H2 FY Total
Revenue 103,175
Profit 25,159
Margin 23.50%

Full Year 2017
Revenue 173,595
Profit 40,291

Edit: it looked much easier to follow in Excel, hope it makes sense..

[maxwellsdemon] 29/10/2017 16:04

"A new investor note is out today from Ming-Chi Kuo of KGI Securities. In the note, Kuo explains that it’s likely Apple “won’t repeat” the supply and production struggles it experienced with the iPhone X with the new 2018 iPhone models…

Kuo writes that shipments of the 2018 iPhone models will arrive on time and in stable supply during late Q3 of 2018. He says there will be “no major spec upgrade” of the TrueDepth camera that helps power the Face ID biometric technology, with Apple using the same dot projector and infrared camera........................"

[hitsha1] 29/10/2017 15:46

So Crunk what share price at 170m

[thecrunk] 29/10/2017 14:51

FY 2016:

Photonics contributed 6.8m to total operating profit of 15.4m despite comprising only 22.7m of a total of 132m company revenue . Therefore gross operating profit percentage on photonics for 2017 was 6.8m/22.7m = 30% gross profit percentage. So fairly high compared to others revenue line items and this is operating at a fairly low economies of scale.

Now assume for FY 2017 you have all other revenue line items contributing the same revenue as 2016 (when in reality it will be a lot more). That gives you 91.2m wireless Revenue, 10.5m Infrared and conservative estimated 10m other.
This gives you based revenue for 2017 excluding PHOTONICS of 111.5m if IQE earned purely the same as 2016 in 2017. You could could reasonably add a modest 10% growth YOY giving you 122.65m.

Now photonics you can assume the 22.7m of 2016 revenue was not for VSCELS for lumentum and others as they were not supplying them then. So this is photonics revenue for non-apple related stuff. So this will repeat in 2017 and you can assume a modest growth rate of 10% 2016 to 2017 YOY. This gives you 24.97m.

This means baseline 2017 revenue before you factor into account wafers that go into apple is 122.65m plus 24.97m = 147.62m

Now what of wafers to apple?

If you read the 2017 H1 results it states the effect of mass market ramp up in PHOTONICS was only felt in June. i.e only one of the six months reported:

“Continued strong growth in Photonics includes the early phase of a significant ramp in VCSEL wafers for a mass market consumer application, and contributed to record monthly Photonics sales in June 2017.”

What was total 2016 Photonics revenue? It was 22.7m.

What was H2 2016 Photonics revenue? You take 22.7m and subtract 10.705m being the H1 2016 photonics revenue reported in note 4 of the 2017 H1 results. This gives you H2 2016 PHOTONIC revenue of 11.995m.

Now here is the trick WHAT GIVES RISE TO THE SEQUENTIAL INCREASE IN PHOTONICS REVENUE FROM H2 2016 TO H1 2017 OF 11.995M TO 15.867M? RISE OF 3.872M?
H1 2017 PHOTINICS REVENUE IS REPORTED AS 15.867M IN THE 2017 H1 RESULTS NOTE 4.
THE RISE OF 3.872M IS THE JUNE SALES OF THE START OF SUPPLY FOR RAMP UP FOR MASS MARKET CONSUMER APPLICATION.

This tells you how much monthly ADDITIONAL revenue IQE will earn. The 3.872m is also very conservative as they likely did not supply a lot for their first month of supply.

So back to 2017 revenue forecast. I take the 147.62m and add in incremental increase in photonics revenue (3.872m multiplied by 6 months) = 23.232m. THIS GIVES ME FORCASTED REVENUE FOR 2017 OF TOTAL 147.62M PLUS 23.323M = 170.852M
So my forecast revenue for 2017 is 170.852m however I think that is conservative. However a base case beat on analyst expectations by 17%.

I guess we shall just have to wait and see................

[sweenoid] 29/10/2017 14:40

SSC 123
And your guesstimates miss out ENTIRELY our GAN business , that the CEO AND Chairman and everyone on the board excepting the new NED, believe WILL be THE major revenue earner in the company, beating even photonics

Mouth- watering Innit :-)

This year analysts have been completely unable to estimate the VCSEL earnings , it's been an impossible task, next year they will have the same difficulties with GAN :-)
S

[ssc123] 29/10/2017 14:22

I have projected the revenues based upon the actual revenue for Yr 2016 broken down by Wireless -WI(91.3) Photonics-PH(22.8) Infrared - IR (10.6) CMOS (1.4) and License -LI( 6.7) ie Total 2016 Revenue 132.7m and assuming the following growth rates
Yr 2017 WI (10%), PH (50%) IR (20%) CMOS (0) LI (-70%) - Total Revn (150.7m)
Yr 2018 WI (10%), PH (80% ie major rampup) IR (20%) CMOS (0) LI (10%) Total Revn.(190.9m)
Yr 2019 WI (10%), PH (75%) IR (20%) CMOS (0) LI (10%) Total Revenue (251.4m)

This is an increase of 90% over 3yrs ie compound annual increase of around 25%
The assumptions are mainly for high growth rates for Photonics and the rest as per current growth rates. I think these assumptions are conservative and there is a reasonably high likelihood that growth assumptions are exceeded (based upon reason well explained in various posts by sweenoid).

In terms of the above revenues and because the leveraged business model I am assuming that the eps will grow by around 40% pa over the next 3 years. Assuming that after that eps growth is 20% pa for another 4 years and then 5%pa thereafter I caculate a price of 143p (which is remarkably close to the current price)
On this basis I am happy to hold onto my current investment in IQE even they have multi-bagged since my initial investment and have been tempted to 'lock-in' the gains so far.

[bocase] 29/10/2017 13:03

Sheepy:

I loved your link. Had us in fits. Very appropriate.

[sweenoid] 29/10/2017 12:42

Could easily be :-), but if I said that I would be accused of ramping , so,I am glad that you did 🤑

[oozededaddy] 29/10/2017 12:13

For what its worth ... literally,

the price per wafer is likely to be several fold higher, possibly up to $10,000/wafer.



Job done

[sweenoid] 29/10/2017 12:04

It's a very educated guess
A complicated wafer won't cost a £ or tens of pounds or hundreds , that inconceivable, considering the process, expense, ingredients, the number of VCSELS harvested from each wafer, etc.

I don't believe a wafer would cost tens of thousands of £ either
Therefore it's in the £thousands, my guesstimate would be £2-3000 per wafer.

I asked a question at the AGM tour around the HQ facility about transportation costs, breakages , rejects etc ( VCSEL Wafers are fully tested to customerspecs prior to leaving the fab, any issues with them, down the line are the customers issue, as IQE can provide the evidence of test data) and I am almost 100% certain CHRIS Meadows mentioned 'thousands' in one of the reply.There is no point asking , it will be NDA material.
S

[oozededaddy] 29/10/2017 11:52

Good stuff sweenoid, out of interest, you mentioned:

26 Oct '17 - 8021

"Very briefly a VCSEL wafer costs £thousands of pounds, IQE's customer takes the wafer and makes 'chips' out of it - this is very simplistic ...."

Dave, where are you getting the thousands price estimate from, and can you be a bit more specific and precise in terms of the number of thousands.

Naturally, I understand some wafers may cost more than others based on design and performance spec etc, but how are you evidencing the cost. Has this been reported elsewhere or has this question cropped up from a board/investor meeting?

Thanks