Results

• 1HFY17 revenue of RM557m was translated into a much anticipated core net profit of RM75m, accounting for 45% of HLIB full year forecast, but below consensus at 39%

Deviations

• In line.

Dividends

• Declared 2 nd single tier dividend of 1.8 sen (2QFY16: 1.2 sen) per share, which goes ex on 15 Mar.

Highlights

• QoQ: Despite stronger US$ boost, revenue grew marginally by 2% due to changes in product mix. After adjustment of FOREX gain, core net profit actually fell by 10%.

• YoY: For the same reasoning as above, top line contracted by 6.3% amidst stronger US$ while core earnings fell 14%.

• YTD: Revenue declined 2.1% while bottom line fell by 10% can also be explained by the factors mentioned above.

• Referring to recent data by Gartner, worldwide semiconductor revenue is forecasted to expand 7.2% to US$364bn in 2017. The positive outlook is driven by inventory replenishment and increase of ASP in selected markets, particularly commodity memory and application-specific standard products.

• Inari is cautiously optimistic in maintaining the performance in line with the industry trend focusing on wireless RF and opto electronics businesses. It will continue to work on new manufacturing opportunities to enhance its overall growth.

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 / high dependency.

• FOREX risks.

• Patent disputes.

• Resources / labour shortage.

Rating

UNDER REVIEW

• Largest OSAT in Malaysia specializing in communication and networking segments which are poised to grow further. Pick up in new businesses and successful turnaround in Amertron will be catalysts.

Valuation

• Stock rating and target price are under review pending analyst briefing today.

Source: Hong Leong Investment Bank Research - 24 Feb 2017