IQE plc (AIM: IQE), a leading global supplier of advanced products and services to the semiconductor industry, announced that it has successfully placed 67,941,581 new ordinary shares of 1 pence each in the Company, at a price of 140 pence per share, raising gross proceeds of approximately £95 million. The Shares placed represented approximately 10% of IQE's existing outstanding issued share capital.
The sale ensured that IQE Plc continued its upward trajectory, rising as much as 19%, after reporting expansion plans that may include new mass market opportunities. The Welsh company's stock, which was trading at about 39p at the end of last year, is now worth four times as much. The stock has already been hailed as the ‘bitcoin of U.K. equities' ,having increased its value by 335% this year, with prospects for further growth.
Citi analysts have started their IQE coverage with a buy recommendation and a 195 pence price target, saying there could be upside for shares driven by the “wider 3D sensing opportunity in smartphones, a resilient business model & scope for margin expansion.” IQE designs wafers necessary for Vertical Cavity Surface Emitting Lasers (VCSELs), used for 3D sensors and widely expected to be included in the new iPhone. Analysts have also noticed the growing appreciation for IQE’s “unique” positioning in the compound semiconductor value chain.
Funds from the share placing will be used to accelerate new products and technology development, while at the same time “protecting and enhancing its current positioning in a fast-moving marketplace.” Current earning forecasts, which could be revised further upwards, are saying earnings per share for the firm are predicted to grow this year by 3% and next year by 21%.
The shares are already relatively expensive for its class, having a forward P/E of 49: if IQE earnings continue to rise in the next five years to 20%, earnings per share will be around 10p, translating into a forward P/E of 16 at current prices. With the current valuation of 49 times forward earnings the share price could grow to 490p. IQE Plc is doing especially well when measured against its competitors, with sectoral big beasts such as Germany’s Dialog Semiconductor suffering from being overly-reliant on Apple and described as having a ‘disappointing’ outlook.