Investment Highlights

• We are raising our fair value of Inari Amertron (Inari) to RM3.00/share from RM2.80/share, as we roll forward the earnings base to FY19F. The fair value is pegged to an unchanged PE multiple of 18x, which is 1SD above its 3- year average. We maintain our HOLD recommendation.

• From various news reports, huge crowds gathered outside Apple stores worldwide before iPhone X goes live today. We believe this signals strong demand for iPhone X and has squashed concerns about the price of the new smartphone as well as its sales prospects.

• According to Bloomberg, Apple is providing sales guidance for iPhone X that exceeds most analyst estimates, signaling its absolute confidence in the new smartphone. This comes after Apple announcing a 19% increase in profits and record pre-sales of iPhone X yesterday, having sold 46.7 million units of its flagship iPhones in the last 3 months (which beats analysts' expectations), as reported by The Guardian. We note that 46.7 million units represent ~60% of Apple's iPhone sales in the first quarter of 2016.

• On another note, Bloomberg cited Tim Cook as saying that production is going well and the current 6-week shipping estimate for online iPhone X orders will be reduced. In fact, iPhone X shipping estimates have already improved to 3-4 weeks in several major regions, vs. 4-5 weeks previously estimated, according to Mac Rumors.

• We believe the overwhelming response for iPhone X bodes well for our local semiconductor companies, including Inari.

• We continue to like Inari due to its positive prospects from: 1) higher RF orders from the launch of a flagship smartphone model; 2) rising adoption of iris-recognition technology; and 3) capacity expansion in P13 plant to ready the group for more jobs.

• Nevertheless, we are keeping our HOLD recommendation as the share price trades near its fair valuation.

Source: AmInvest Research - 3 Nov 2017