Results

• FY15 sales of RM933.1m was translated into a core net profit of RM130.3m which came in within expectation, accounting for 98.1% of HLIB’s full year forecast but shy of street’s estimate by 10.7%.

• One off adjustments:
• 

Deviations

• In line.

Dividends

• Declared 4th single tier dividend of 2.3 sen (4QFY14: 1.8 sen) per share, represent circa 39.5% payout as per policy. Exdate on 9 Sept 2015. YTD dividend amount to 8.9 sen per share (FY14: 6.8 sen).

Highlights

• 4QFY15 turnover of RM255.0m (+13.9% yoy and +11.7% qoq) was another historical high mainly due to higher trading volume from RF business as demand from smartphones and mobile devices swelled. This was also partly boosted by the strengthening of USD which averaged circa RM3.66/USD (+13.0% yoy and +1.1% qoq).

• It remains optimistic on business prospects and believes that global semiconductor industry will grow by 3.4% to USD359bn in 2016. For 2017, the market is forecasted to be USD370bn, up by 3.0%. By end application, automotive and wireless communications are projected to grow stronger than the total market, whereas consumer and computer are assumed to remain almost flat.

• The proceeds from the right issue will enable Inari to expand production capacity, in particular, at the new P13 plant. P13 is in production and has contributed modestly in 4QFY15 and expected to continue to provide growth impetus in FY16.

Forecasts

• Unchanged pending analyst briefing today.

Catalysts

• Wireless communications / mobility / IoT (M2M) / LTE.

• Business diversifications into optoelectronics and T&M.

• Favorable FOREX.

• Continuous effective operational strategy.

Risks

• Major client risk (Avago) / high dependency.
• FOREX risks.
• Patent disputes.
• Resources / labour shortage.

Rating

BUY , TP: RM3.67

Positives

• Appreciation of greenback, 40% dividend payout providing reasonable yield and strong earnings growth.

Negatives

• Innovation stalemate in telecommunication.

Valuation

• Reiterate BUY while TP is maintained at RM3.67 pending analyst briefing. TP is pegged to multiple of 15x of CY16 EPS.

Source: Hong Leong Investment Bank Research - 21 Aug 2015