Can Inari Innovate Its Future in the Challenging Electronics Industry?

Inari Berhad is an investment holding company with subsidiaries involved in the electronics manufacturing services (EMS) industry. The Inari Berhad Group started in June 2006 with the establishment of Inari Technology Sdn Bhd (Inari Technology). Inari Technology is an EMS company principally involved in back-end semiconductor packaging, which comprises back- end wafer processing, package assembly and RF final testing for the electronics/semiconductor industry. Inari Technology’s customers are primarily in the wireless communication segment.

Inari Technology’s capabilities are not limited to the wireless microwave telecommunication semiconductor segment; Inari Technology is also capable of manufacturing the entire range of semiconductor products for other segments of the semiconductor industry.

Based on Financial Year (FY) 2015 full year results, Inari achieved very close to a RM 1 billion turnover, which can be considered as a mid to large size enterprise. Other aspects of the company’s latest financial results are illustrated in the table below.

In terms of revenue, Inari has achieved consistent growth throughout the past 5 years of listing. Inari’s revenue during first year of listing (FY2011) is merely RM 119 million. On FY2014, Inari has acquired Amertron Inc. resulting in a big 229% jump in revenue to RM 793 million as compared to previous financial year.

This consistent revenue uptrend is not only observed on a yearly basis, even on quarterly basis, Inari’s revenue had never fail to increase in the past 10 quarterly results. Therefore it is very likely for Inari to surpass RM 1 billion revenue in the upcoming FY2016 financial result.

This year to year surge in revenue is mainly driven by the strong growing market demand in smart phones and tablets, which requires wafer processing services and testing services under the Radio Frequency (RF) and opto-electronic business units of Inari.

With such strong growth in revenue, no doubt Inari has similar excellent growth in net profit as well. In terms of net profit margin, Inari is able to achieve 15.68% which is considering excellent in the manufacturing industry.

Inari is also able to maintain a low debt business model with a total debt to equity ratio of only 0.1. Such low debt also explains the high number in current ratio and cash ratio at 3.56 and 1.751 respectively. Such nice financial ratios are very attractive for long term investors as companies with low debt generally can withstand economic downturn very well.

Having a dividend yield of 2.144% is considered an average and acceptable dividend pay-out, however, another plus point for Inari is that they have been paying consistent dividends on quarterly basis, which shows the strong financial capability and commitment of the company to the shareholders.

In conclusion, Inari not only has passed all financial evaluation aspects with flying colours, it has also demonstrated the on-going growth of the company through their revenue records despite being in a challenging electronics industry. As their main business is strongly tied with smart phones and tablets, we will definitely see Inari’s share price grow along side with the increase of smart phones and tablets along the streets.

iVolume Spread Analysis (iVSA) & comments based on iVSAChart software – Inari

For Inari, after the registration of two sign of weakness around early Jan 2016, at RM3.65 - RM3.95, the market has build a nice base for accumulation @ RM3.15 - RM3.20.

Also note that there are three Sign of Strength around end Mar and early April 2016, indicating potential buy if triggered above RM3.30 - RM3.40.

However, there is a failed test around RM3.18 level and current sell-off bar which is a sign of weakness indicating potentially more weakness to come should Inari break lower than RM2.85.

Likely, Inari will move sideways in the shorter term. Next resistance is @ RM3.20. Cut loss level is around RM2.73.

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This article only serves as reference information and does not constitute a buy or sell call. Make your own assessment before deciding to buy or sell any stock.