Results

• 9MFY17 revenue of RM830.7m was translated into a much anticipated core net profit of RM128.2m, accounting for 74.5% of HLIB full year forecast, but below consensus at 66.7%.

• One off adjustments:

RMm Stocks Defer’d inc. PPE FOREX Others Total

3QFY16 0.0 0.0 0.0 7.2 0.0 7.2

2QFY17 1.3 0.0 0.0 -23.1 -5.6 -27.4

3QFY17 -0.2 0.0 0.0 6.1 -4.1 1.8

9MFY16 0.0 0.0 0.0 3.8 0.0 3.8

9MFY17 -1.3 0.0 0.0 -23.1 -9.7 -34.0

Deviations

• In line.

Dividends

• Declared 3 rd interim single tier dividend of 2.2 sen per share, which goes ex on 6 Jun.

Highlights

• QoQ: Despite stronger US$ boost, revenue was flat with 0.4% decline due to changes in product mix. After FOREX adjustments, core net profit actually upped by 48.9%.

• YoY: Top and bottom lines improved 26.1% and 85.6%, respectively thanks to increased demand and stronger US$.

• YTD: Revenue rose 5.7% along with core earnings which expanded by 14.3% attributable to higher volume loading and stronger US$.

• Referring to recent data by Gartner, worldwide semiconductor revenue is forecasted to expand 12.3% to US$386bn in 2017.

• Inari is cautiously optimistic in maintaining the performance in line with the industry trend focusing on wireless RF and opto electronics operations including the newly invested iris scanning project.

Forecasts

• Unchanged.

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

HOLD , TP: RM1.70

• 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

• Reiterate HOLD with unchanged TP of RM1.70 based on 15x of CY18 FD EPS. Although our TP reflects more than 10% downside, HOLD call is retained pending analyst briefing this morning

Source: Hong Leong Investment Bank Research - 17 May 2017