FY15 core earnings soared 44.5% YoY to MYR146.0m, coming in within expectations. Maintain BUY with a higher MYR4.55 TP (from MYR4.41, 45% upside), as we upgrade our FY16-17F EPS by 2.8-3.9% to reflect our revised USD/MYR assumption of MYR4.00 going forward. Management declared its fourth interim DPS of 2.3 sen, bringing FY15 DPS to a hefty 8.9 sen at an implied yield of 2.8% for the period.
Results review. FY15 (Jun) revenue closed at MYR933.1m (+17.6% YoY), driven by increased orders in its radio frequency (RF) division from its customer Avago Technologies (Avago) (AVGO US, NR). Stripping out unrealised forex gains of MYR6.5m, core earnings climbed 44.5% YoYto MYR146.0m, lifted by a lower effective tax rate, higher interes t income from its growing cash pile, as well as a favourable USD, which averaged at MYR3.46 in FY15 vs MYR3.24 in FY14. We deem this within expectations, at 103.1%/101.5% of our/consensus full-year estimates. 4QFY15 numbers were generally up both YoY and QoQ, with core earnings coming in at MYR43.5m.
Generous dividend. Management declared a fourth interim DPS of 2.3sen, which translates into a payout ratio of 41.3% for the quarter. FY15 DPS totalled 8.9 sen at a payout ratio of 37.2%, 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 MYR231.0m, which works out to be 31.8 sen per share based on its outstanding share base.
Forecasts and risks. We upgrade our FY16-17F EPS by 2.8-3.9% as we revise our USD/MYR assumptions to MYR4.00 for FY16-17 (from MYR3.70), while tweaking lower our average ASPs in the USD – as we expect its direct customers to push for more competitive pricing in view of the current MYR weakness. We also take the opportunity to introduce our FY18 forecasts. Key risks include potential margins erosion upon maturity of Inari Amertron’s (Inari) 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 revise our SOP-based fully-diluted TP to MYR4.55(from MYR4.41), based on an unchanged 18x 2016 P/E following our earnings revision. Given the appealing upside of over 45%, we are maintaining our BUY recommendation.
Source: RHB Research - 21 Aug 2015
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INARICreated by kiasutrader | Jun 14, 2016
Created by kiasutrader | May 05, 2016