Interactive Investor

Insider: big bets on recovery at IQE and a FTSE 250 share

This small-cap tech firm used to be a firm favourite with investors until it fell on hard times. The CEO is now investing his own money in the firm, positioning for the upturn.  

13th November 2023 08:42

by Graeme Evans from interactive investor

Share on

microchip circuit semiconductor chip tech 600

A flurry of bets on IQE (LSE:IQE) shares included a £240,000 purchase by the chief executive as the value of the AIM-listed semiconductor wafers firm jumped 15% last week.

Americo Lemos, who joined from New York-based GlobalFoundries almost two years ago, has taken his stake in Cardiff-based IQE to 1.02% following Thursday’s investment at 17.15p. Shares went from 15.4p at the start of the week to close Friday’s session at 17.7p.

The strong demand was a throwback to the days when IQE captured the imagination of retail investors due to its exposure to the iPhone boom, with shares as high as 170p in 2017.

As well as epi wafers and substrates to successive generations of the consumer mobile market since the early 1990s, the company has enabled wireless and optical communications across the various generations of telecoms network infrastructure.

The shares have since suffered on the back of supply chain challenges, as well as the recent impact of an industry-wide inventory correction. That caused half-year operating losses to widen to £17.5 million on revenues 40% lower at £52 million.

However, September’s interim results noted signs that the downturn has stabilised, with “pockets of recovery” expected in the second half of the financial year.

Positioning for the upturn has seen the company accelerate diversification, with new customer designs in power electronics and a broader push into the China wireless market.

When Lemos joined the company in January 2022 he pledged to build a commercial engine more orientated to IQE end markets, including through strategic and long-term customer relationships.

This was seen in September’s announcement of a collaboration with VisIC Technologies, part of IQE’s pursuit of opportunities in the GaN Power epiwafer market.

House broker Peel Hunt highlighted a price target of 61p after September’s results, when it said the 2024 outlook looked to be more promising.

Buying interest spiked on Wednesday after nearby Newport Wafer Fab was bought by Seattle-based Vishay Intertechnology for $177 million (£145 million).

In addition to expanding capacity, Vishay pledged to collaborate with the semiconductor cluster in South Wales as well as university and community partners.

Vishay said: “We see investment in a minimum of 20-year cycles. By investing in the production of new technologies, we believe Newport Wafer Fab has the potential to bring significant benefits to the wider economy in Newport and Wales.”

The acquisition took place a year after the UK government ordered previous owner Nexperia to sell its majority stake because it had a Chinese parent company.

Netherlands-based Nexperia bought its stake in 2021 from Drew Nelson, who ran IQE from its listing in the dotcom boom in 1999 up until the arrival of Lemos in January 2022. He is still on the IQE board as president and non-executive director.

A confident mid-cap chief in buying mood

A long-serving director of IWG (LSE:IWG) has bought £70,000 of shares after the flexible workspace provider revealed another quarter of revenues growth.

Senior independent director François Pauly, who joined the board in 2015, made his purchases in two parts on Wednesday and Friday at prices of around 139p.

The FTSE 250-listed stock closed the week at 144p but had been as high as 197p earlier this year. The owner of the Regus and Spaces brands, which has 3,455 locations across more than 120 countries, said system revenues of £830 million for the September quarter represented constant currency growth of 8% year-on-year.

Founder and chief executive Mark Dixon said that the “structural growth” in hybrid working combined with IWG’s market position resulted in continued revenues momentum.

He also highlighted the benefits of a focus on capital-light expansion, which has enabled IWG to deliver around 40% more locations in 2023 than in the whole of 2022.

Debt has fallen, down by £24 million in the quarter to £634 million as revenues growth and cost discipline boost cash generation.

The update on Tuesday confirmed the outlook for 2023 results, with IWG confident that both underlying earnings and year-end debt will be in-line with expectations.

The update came as WeWork filed for bankruptcy protection in the United States, a collapse that led to questions over whether IWG will take on some of its rival’s buildings.

Further details on IWG’s plans are likely to emerge on 5 December, when it hosts a capital markets day for analysts and investors in New York City. Ahead of the briefing, broker Peel Hunt has a target price of 170p and “Add” recommendation.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Get more news and expert articles direct to your inbox