INARI (0166) - Actualising Through Technology & Innovation

Inari Amertron Berhad (1000809-U) is an investment holding company with subsidiaries involved in the electronics manufacturing services (EMS) industry. The Inari Amertron Berhad Group started in June 2006 with the establishment of Inari Technology Sdn Bhd (Inari Technology). Inari Technology is an EMS company principally involved in back-end semiconductor packaging, which comprises back- end wafer processing, package assembly and RF final testing for the electronics/semiconductor industry. Inari Technology’s customers are primarily in the wireless communication segment. In July 2011, the group achieved listing on The ACE Market of Bursa Malaysia. In June 2013, the group acquired Amertron Global Inc and changed name to Inari Amertron Berhad. The acquisition of Amertron Global added opto-electronics and fiber optic capabilities to the group and manufacturing facilities in Malaysia, Phillippines and China. Inari Technology’s capabilities are not limited to the wireless microwave telecommunication semiconductor segment; Inari Technology is also capable of manufacturing the entire range of semiconductor products for other segments of the semiconductor industry. In June 2014, Inari Amertron Berhad has successfully transferred its listing status to the Main Market of Bursa Malaysia Securities Berhad. The transfer listing to the Main Market, just three years after our listing on the ACE Market reflects positively on the Group`s larger scale of operations. With 9 facilities across 3 countries: Malaysia, China and the Philippines, Inari Amertron Group is a multinational corporation (MNC) with an employee strength of about 5,000. Inari Services       - Wafer Sort - Assembly - RF Testing - Other Services - Process Capability - Current products

 Results review. FY15 (Jun) revenue closed at MYR933.1m (+17.6% YoY), driven by increased orders in its radio frequency (RF) division from its customer Avago Technologies (Avago) (AVGO US, NR). Stripping out unrealised forex gains of MYR6.5m, core earnings climbed 44.5% YoY to MYR146.0m, lifted by a lower effective tax rate, higher interest income from its growing cash pile, as well as a favourable USD, which averaged at MYR3.46 in FY15 vs MYR3.24 in FY14. We deem this within expectations, at 103.1%/101.5% of our/consensus full-year estimates. 4QFY15 numbers were generally up both YoY and QoQ, with core earnings coming in at MYR43.5m.

 Generous dividend. Management declared a fourth interim DPS of 2.3 sen, which translates into a payout ratio of 41.3% for the quarter. FY15 DPS totalled 8.9 sen at a payout ratio of 37.2%, largely in line with its dividend policy of up to 40% payout. Following the completion of its rights issuance in March, the group is currently sitting on a net cash pile of MYR231.0m, which works out to be 31.8 sen per share based on its outstanding share base.

RHB target price RM 4.55

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