9MFY15 core earnings soared 46.6% YoY to MYR102.5m, in line with expectations. Maintain BUY with a higher TP of MYR4.35 (31% upside),as we roll forward our valuation to 2016. Management declared its thirdinterim DPS of 2.1 sen, bringing its 9MFY15 DPS to 6.6 sen at an annualised yield of 2.7%.

• Results review. 9MFY15 (Jun) revenue closed at MYR678.1m (+19.0% YoY), driven by increased orders for its radio frequency (RF) divisionfrom its customer Avago Technologies (Avago) (AVGO US, NR). Core earnings of MYR102.5m (+46.6% YoY) came within expectations, at 75.4%/72.4% of our/consensus full-year estimates. 3QFY15 numbers were generally up YoY and QoQ with 3Q core profit at MYR37.6m.
• Generous dividend. Management declared a third interim DPS of 2.1sen. This translates into a payout ratio of 36.9% for the quarter, largely in line with its dividend policy of up to 40% payout . Following the completion of its rights issuance in March, the group is currently sitting on a net cash pile of MYR197.9m, which works out to be 27.7 sen per share based on its outstanding share base.
• Operational updates. Operations at its latest P13 production plant have already commenced with the site now accommodating 120-130 units of RF testers. We understand that Inari Amertron (Inari) could fit in another 150-200 units of testers into the existing facility. We expect these to be installed progressively over the next 6-12 months as the group intends to further capitalise on the fast-growing demand for Avago’s RF products.
• Forecasts and risks. While we make no major changes to our core assumptions, we fine-tune our FY15/FY16/FY17 earnings forecasts by +3.9%/+6.4%/-5.8% as we updated our model for housekeeping purposes. Key risks include potential margins erosion upon maturity of Inari’s product life cycle and competitive pressure from its peers such as Foxconn International (2038 HK, NR) and Advanced Semiconductor Engineering (2311 TT, NR).
• Maintain BUY. We upgrade our TP to MYR4.35 (from MYR3.74) as weroll forward our valuation to 2016 based on an unchanged 18x P/E and following our earnings revision. We expect its FY15-16 earnings momentum to be driven by a favourable forex environment as well as RF capacity expansion, while full earnings accretion from P13 will likely kick in come FY