• One of HLIB institutional top picks with target price of RM4.12 or 24.1% upside. HLIB likes Inari due to its great exposures to growing end application markets, namely telecommunication and IoT, which wil l position Inari uniquely with scalability of its business and visible earnings growth.
• INARI is on a multi-year expansion driven by strong radio frequency (RF) demand on the back of rising 4G network adoption and exponential mobile data growth. The recent share price correction (-9.3% YTD and -16.2% from 52-week high) is a great buying opportunity. At RM3.32, INARI is trading at 13.9x FY17E P/E, supported by EPS CAGR of 22% over FY15-18.
• Poised to revisit RM3.56-3.82 zones after a brief sideways consolidation. After the completion of 1:4 bonus issue (ex-date 4 Jan), Inari share prices corrected 20.7% from a 52-week high of RM3.96 (4 Jan) to a low of RM3.14. However, with prices holding decisively above the 100-d SMA (near RM3.14) and 200-d SMA (RM2.90) coupled with a formation of higher lows during its recent retracement, a decisive breach above RM3.46 (50-d SMA) is likely to spur prices higher towards the RM3.55 (23.6% FR) and our long term objective of RM3.82 levels. Key supports are RM3.19 (29 Jan low) and RM3.14 (18 Jan low and 100-d SMA). Cut loss at RM3.10.
• Attractive risk to reward ratio with 15.1% upside against 6.0% downside. All in, we see an attractive risk to reward ratio for investor with a theoretical entry price of RM3.32 given that the downside to the cut loss zone of RM3.12 is 20 sen (-6.0%) while the upside to the LT price objective of RM3.82 is 50 sen (+15.1%).
• A better trading exposure is through INARI-WB (Expiry: 17 Feb 2020; Premium: -1.2%; gearing: 1.98x; 1-month average volume: 1.27m) compared with INARI-WA (Expiry: 6 Apr 2018; Premium: -1.7%; gearing: 1.1x; 1-month average volume: 13k), as INARI-WB has longer expiry and better liquidity coupled with higher gearing.

Source: Hong Leong Investment Bank Research - 5 Feb 2016