Inari  Amertron’s  (Inari)  FY14  core  earnings  soared  141%  y-o-y  to MYR101.3m,  in  line  with  our  and  consensus  forecasts.  Management declared its fourth interim DPS of 1.8 sen, bringing its FY14 DPS to 6.8 sen  (from  4.5  sen  in  FY13).  No  changes  to  our  earnings  estimates. Maintain  BUY,  with  an  unchanged  FV  of  MYR3.82  (or  MYR3.46  upon completion of proposed rights exercise), based on a 17.5x CY15 P/E.

Within  expectations.  Inari’s  FY14  revenue  surged  229.1%  y-o-y  to MYR793.6m,  driven by higher  demand for  its integrated packaging and testing  services  (IPTS)  from  its  single  largest  customer,  Avago Technologies Ltd (AVGO US, NR), which  we estimate contributes  >75% of  its  total  sales.  EBITDA,  meanwhile,  jumped  130.0%  y-o-y  to MYR135m as its overall margin  came in at  17.0% (down from 24.3% in FY13  due  to  consolidation  of  the  lower  margin  but  higher  volume Amertron  business).  Overall,  FY14  core  earnings  of  MYR101.3m  were largely  in  line  with  our  and  consensus  expectations,  at  105.0%  and 102.6%  of  the  full  year  estimates  respectively.  The  4QFY14  numbers improved q-o-q and y-o-y across the board on better sales volume.      

Declares  interim  dividend.  The  company  declared  its  fourth  interim DPS  of  1.8  sen, bringing its  FY14  dividend per share (DPS) to  6.8 sen against 4.5 sen in FY13. This implies  a decent payout ratio of 40%, or a 2.1%  yield  for 

Forecasts  and  risks.  With  the  results  largely  in  line,  we  make  no changes  to  our  FY15F  and  FY16F  estimates  at  this juncture.  The  key risks include  potential margins  erosion  upon maturity  of  Inari’s  product life  cycle  and  competitive  pressure  from  peers  such  as  Foxconn International (2038 HK, NR) and Advanced Semiconductor Engineering (2311 TT, NR).

Maintain  BUY.  We  reiterate  our  BUY  call,  with  our  FV  unchanged  at MYR3.82  (or  MYR3.46  ex-rights),  based  on  a  17.5x  CY15  P/E.  We continue  to  like  the  stock’s:  i)  established  partnership  with  Avago;  ii) decent balance sheet with strong operating cash flow generation; and iii)potentially sturdy earnings CAGR of 22.5% over the next two years.

Source: RHB