IQE shares sliced on flat sales guidance, but analyst sees potential

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IQE PLC (AIM:IQE) shares are down 12% to 46.37p in afternoon trading on Tuesday after the Welsh semiconductor industry supplier’s results statement disappointed.


The company posted an operating loss and guided to broadly flat sales and flat adjusted profits (EBITDA), implying EBITDA may not be much higher than it was in 2017.


“As investors keep reading about shortages of silicon chips, strong demand for electronic gadgets and the wonders of fifth-generation (5G) mobile technology, they could be forgiven for being a bit disappointed,” said Russ Mould, investment director at AJ Bell.


However, with net cash on the balance sheet and a GBP20-30mln capital investment budget for 2021 to expand capacity to manufacture wafers, Mould said this helps to underpin analysts’ forecast of rapid sales and profit growth in 2022 and 2023, as 5G mobile handset demand remains strong, 5G network equipment orders bounce back and the internet-of-things continues to drive demand for wirelessly connected devices.


“A forward price/earnings ratio of 20 for 2023 is the sort of territory that will put off deep value-seekers and appeal only to growth and momentum investors. Such a rating leaves little margin for error, although IQE’s GBP125mln in fixed assets and production equipment (compared to forecast annual sales for 2021 of GBP174mln) do mean that the business is highly operationally geared.


“Even a small change in sales could lead to a big increase in profits (although the opposite also holds true), so IQE’s lofty valuation could prove deceptive and rapid upturn in sales could mean the shares are a lot cheaper than they first appear.”


1.12pm: Kazera Global climbs on Namibia offtake deal


Kazera Global PLC (AIM:KZG) was up 9% to 1.5p at lunchtime on the back of an exclusive offtake agreement for its mine in Tantalite Valley, in Namibia.


All tantalum produced until December 2024 will be sold to China’s Jiujiang Jinxin Nonferrous Metals at a fixed price.


“We chose to enter into an agreement with Jinxin because they clearly understand the complexities of plant operational restarts and can utilise the high grade of Tantalite. I have also had extensive positive experience of working with them in the past,” said Kazera’s joint chief executive Larry Johnson.


“Sourcing product from Namibia has major advantages for buyers as the country is far removed from conflict and has excellent infrastructure. We were approached by dealers in Tantalum who would have accepted much lower standards, but who we felt have less growth, flexibility and commitment than displayed by Jinxin.”


12.10pm: Maestrano climbs after Network Rail approves technology rollout


Maestrano Group PLC (AIM:MNO) climbed 13% to 15.25p at noon after Network Rail approved technology from its subsidiary Cordel across the UK rail network.


It will be used to determine whether a different train will fit along a given route. This will make it easier to introduce new trains onto the network, the AIM-listed firm said.


“Using the Cordel Workbench will significantly enhance Network Rail’s ability to achieve financial efficiencies within its five-year delivery plan as well as contributing to its safety and environmental targets,” said Maestrano’s chief executive Nick Smith.


“With Network Rail known as the global leader in clearances management, the approval has proved that our technology is a world leader in clearance data automation. It will support our expansion into other markets as we utilise this proven technology with other customers.”


10.55am: Parsley Box drops after interim losses swell


Parsley Box Group Plc (AIM:MEAL) dropped 12% to 107.5p after its interim loss before tax swell 431% to GBP5mln.


The ready meals producer said it was due to higher input prices across the food industry, which are not expected to calm down due to supply chain issues.


The AIM-listed group has also invested heavily in marketing, with GBP1.2mln spent in TV ads alone to build brand awareness among the Baby Boomer+ demographic.


Elsewhere, 888 Holdings (LSE:888) plc shed 1% to 400.8p after its Sports Illustrated wagering experience, SI Sportsbook, launched in Colorado.


SI Sportsbook combines 888’s proprietary and scalable technology with Sports Illustrated’s brand. It’s purpose-built for the US market and has launched ahead of the National Football League season.


“We strongly believe we have developed a unique and differentiated sports wagering experience that combines the power of our proprietary technology platform with one of the most impactful sports media brands for nearly 70 years,” said Yaniv Sherman, head of US at 888.


“By partnering with Sports Illustrated, we have created a strong platform that enables us to build our US position through Sports Illustrated’s extensive brand footprint. This provides an opportunity to cost-effectively acquire customers and build a profitable business over time.”


9am: Orosur Mining early riser as joint venture partner to become operator at Colombia project


Orosur Mining Inc (AIM:OMI, TSX-V:OMI) was an early riser on Tuesday, jumping 15% to 23p after its joint venture partner Minera Monte Aguila said it will become operator.


The pair are working on the Anza Project in Colombia, which requires an extra US$4mln to carry out exploration work.


Minera Monte Aguila is a joint venture between Newmont Corporation and Agnico Eagle Mines Limited.


Fellow miner Europa Metals Ltd (AIM:EUZ) advanced 9% to 8.75p after announcing that the latest drilling results from the upper zone of its Toral base metals project were exceptional and exceeded its initial expectations.


Assay results included high-grade intersections of lead, zinc and silver as well as an interval of almost 1% copper from the project in Spain.


Significant intersections from three drill holes into the upper zone, included: 2.7 metres at 11.14% zinc equivalent from a depth of 225.90 metres; 1.1 metre at 4.24% zinc equivalent from 251.50 metres; and 14.85 metres at 8.36% zinc equivalent from 328.50 metres.

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