The Investment Column: Semiconductor firm is making theright connections


IQE

Our view: Buy

Share price: 16.25p (+0.75p)

The chances are that you've been using IQE's products for years without realising it. If you own a mobile phone, a BlackBerry or a wireless internet set-up then you've probably got your hands on an IQE semiconductor wafer.

A semiconductor wafer, which is manufactured out of gallium arsenide, or GaAs, is a piece of technology that enables computer chips to transmit wireless signals, making the company a techie's dream. But for investors that couldn't give a megabyte about the science, the firm is well worth looking at, too.

According to analysts at FinnCap, who recommend a buy, the company is ideal as a defensive investment. "They are obviously not immune from recessionary concerns," said one watcher. "But mobile-phone makers have to get as many third-generation phones into the market as possible."

The mobile operators spent a fortune a few years ago on the 3G licences and so they need to push them out to as many people as possible; the good news for IQE stockholders is that each device needs four or five times the amount of GaAs than is required for an ordinary phone.

Another reason to be cheerful, says the company, is its financial set-up. According to its chief executive, Drew Nelson, for every pound of revenue, "50 per cent feeds into the bottom line", and the firm has had three consecutive years of 50 per cent growth.

The group announced its annual results yesterday, showing revenue at just a nick over £50m, up from £32.4m the year before, although this came with an overall £900,000 loss compared with losses of £4m the year before.

The company also announced yesterday that it had signed a new contract with US semiconductor group TriQuint. For investors that are squeamish about the arms trade, TriQuint does supply the military industry with its communications technology and IQE's Nelson confirmed that some of the firm's wafers could find themselves in military equipment. Buy.

Wolseley

Our view: Cautious hold

Share price: 483p (-49p)

By their chief executive's own admission, the fortunes of heating and plumbing products distributor Wolseley this year depend on how well the global economy holds up. "People don't lose their jobs and then buy a house," says Chip Hornsby.

The group announced its annual results yesterday. The figures confirmed that the turmoil that struck the financial markets last year hit Wolseley hard, as they reported a fall of 29.4 per cent in pre-tax profits to £233m.

"The results show that things are pretty tough for Wolseley," says an analyst at Credit Suisse, which has an "Underperform" rating on the shares. "And the outlook is pretty bleak, too". "Underperform" is the bank's speak for "sell".

However, several analysts remained upbeat on the company. The lack of consensus centred on whether or not the group is likely to breach debt covenants it has agreed with investors. Credit Suisse reckons the company has not provided enough information to tell; UBS says it won't, and tells clients to buy the stock. The company says that they run various financial scenarios, giving a number of possible outcomes, none of which shows a covenant breach. A third group of analysts at Landsbanki say hold.

Many of the analysts recommend a rights issue, which the company says is not necessary.

Continued bad news will not help. If more investment banks go the way of Bear Stearns, and if the unemployment rate in the US, where 50 per cent of Wolseley's sales are generated through its US divisions Stock and Ferguson, continues to fall, 2008 could be a very tricky year. The fact that 100,000 Americans have lost their jobs in January and February will not be welcomed. Cautious hold.

Shore Capital

Our view: Hold for now

Share price: 35.5p (-2.5p)

The world's financial system is in a state of distress and its main protagonists, the investment banks, seem to be struggling to maintain order.

But despite all the gloom, Howard Shore, the chairman of niche investment bank and fund manager Shore Capital, says he has reasons to be cheerful.

Despite the hammering the bank took last year, including a decline in pre-tax profits of 29 per cent to £14.3m, Shore reckons the bank is in a good position to ride out the rest of the credit crisis.

The reasons include that the bank is liquid and its balance sheet is in good order and, moreover, about half its salary costs are linked to performance: if their bankers don't make any money, they don't get paid.

The news on Bear Stearns meant that there was a dearth of analyst comment on the results. However, the bank's shares were down by 6.6 per cent yesterday, admittedly as part of a shocking day for equity markets in the UK.

The bank is in decent shape, especially compared with some of its giant competitors, but ultimately its long-term health will depend on the length of the credit crisis and how long it will take for a recovery to take place. Hold for now.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
News
Kelly Osbourne will play a flight attendant in Sharknado 2
people
News
A bartender serves beers
news
Arts and Entertainment
Daniel Craig and Rory Kinnear film Spectre in London
film
Life and Style
The finale at Dolce and Gabbana autumn/winter 2015
fashion
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor