• 2QFY17 normalised earnings came in within our and consensus expectations.

• Inari’s 2QFY17 cash level improved remarkably by +67.3%yoy to RM351.4m

• Meanwhile, dividend of 2.8sen per share was declared in 2QFY17

• Maintain BUY with an unchanged target price of RM2.23 per share

Within estimates. Inari Amertron (M) Bhd’s (Inari) 2QFY17 normalised earnings amounted to RM51.4m after adjusting for unrealised forex gain (RM11.6m). This translates into an increase of +21.3%yoy, which was mainly attributable to improvement in profit margin and lower effective tax rate. On a cumulative basis, 1HFY17 normalised earnings grew by +6.4%yoy to RM95.9m. All in, the group’s financial performance came in within our and consensus expectations, accounting for 52.1% and 50.0% of FY17 full year earnings estimates.

Healthy net cash level. As at 2QFY17, the group’s cash level improved remarkably by +67.3%yoy to RM351.4m. In comparison, 2QFY17 total borrowing stands at -RM52.2m. This has resulted in a healthy net cash level of RM299.2m.

Dividend. Inari announced 2QFY17 dividend of 1.8sen per share as compared to 2.4sen per share announced in 2QFY16. On a cumulative basis, the group has declared dividend of 4.8sen per share in 1HFY17.

Impact on earnings. We are maintaining our earnings estimates at this juncture.

Target Price. We maintain our target price of RM2.23 per share. This is premised on FY18 EPS of 10.5sen pegged to unchanged FY18 forward PER of 21.2x. Our target PER is based on its five-year historical high rolling PER (i.e. since its listing in 2011).

Maintain BUY. Inari’s strategic positioning within the semiconductor value chain has proven to be in favour of the group. The group’s various core business segments have been recording better financial performance. Coupled with financial advantages from MIDA, the group has healthy net cashflow which would be use for business expansion and for rewarding existing shareholders. All factors considered, we maintain our BUY recommendation on the stock.

Source: MIDF Research - 24 Feb 2017