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Author: Jordan Khoo   |   Latest post: Tue, 15 Jan 2019, 09:26 AM

 

Inari: Knocked Down by News of Lower iPhone Sales in China

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Background
 
Inari Amerton Bhd ("Inari") is involved in the outsourced semiconductor assembly and test services and electronics manufacturing services. It is well-known as one of the suppliers to Apple for the manufacture of its iPhones. 
 


Recent Business News
 

Apple recently revealed that it anticipates revenue to come in below expectations. Apple expects revenue of $84 billion in the first quarter - a 5%-decline from the low-end of its previously stated range of $89 billion to $93 billion (here). This will impact Inari as Apple is its major customer.


Recent Financial Performance

Its latest result was for QE30/9/2018, which was released in November 26, 2018. For that quarter, Inari's net profit rose 5.3% q-o-q but dropped 12.0% y-o-y to RM60.2 million while revenue was mixed- up 8.2% q-o-q but down 12.7% y-o-y to RM326 million. Its revenue dropped y-o-y due to lower volume loading. PBT dropped 11.9% y-o-y mainly due to the foreign  exchange fluctuation during the current quarter.


Table: Inari's last 8 quarterly results


Graph: Inari's last 32 quarterly results

Financial Position

As at 30/9/2018, Inari's financial position is deemed very healthy with good current ratio at 3.4x while gearing ratio improved to 0.3x.

Valuation

Inari (closed at RM1.23 last Friday) is now trading at a PER of 16 times (based on last 4 quarters' EPS of 7.7 sen). At this PER, Inari is deemed fairly attractive.

Technical Outlook

Inari has broken below its long-term uptrend line, SS at RM1.50 last week. Its immediate support will be at horizontal line at RM1.10 and then the psychological level of RM1.00.


Chart: Inari's weekly chart as at Jan 4, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on good, albeit weaker financial performance, good financial position and fairly attractive valuation, Inari is a good stock to consider for long-term investment. However its current bearish technical outlook may lead to further price weakness until its near-term financial performance shows clarity after the reported lower sales by Apple.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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Labels: INARI

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