INARI AMERTRON BERHAD
KLSE (MYR): INARI (0166)
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Last Price
2.82
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-0.03 (1.05%)
Day's Change
2.81 - 2.88
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8,228,700
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CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
contrarian168
19 posts
Posted by contrarian168 > 2016-08-11 12:31 | Report Abuse
Inari-Amertron
We visited Inari-Amertron's newest production plants, P13 and P21, which are
also located in Bayan Lepas, Penang. The visit started with a briefing on the
company’s latest developments and outlook for 2H16, followed by a tour of the
facilities. The meeting was hosted by Group CEO K.C. Lau. The key takeaways
from the meeting are below:
1) Management maintains its guidance of 15% qoq revenue growth in
4QFY6/16, driven by recovery in RF component demand ahead of new
smartphones launches in 2HCY16. The group’s utilisation rate hovered at
70% in Jul, higher than the 60% in 3QFY16.
2) Inari plans to raise RF tester capacity from 700 units in Jul to 900 by
1HCY17. Effectively this would raise the group’s RF testing capacity by
30% in FY17. The additional testers would be deployed at P13 and P21.
3) We are impressed by management’s ability to improve operations at its
newly-acquired plant P21, getting it ready for production two months after
taking over the vacant facility in May 2016. To recap, P21 will house the
newly-formed Inari Integrated Systems (IISB) division, which will focus on
test development, product engineering, wafer probe and package tests.
Management expects IISB to contribute revenue of RM70m-80m or 6-7%
of group revenue in FY17.
4) P21 has commenced operations, with two testers running in end-July and it
expects to add about two testers per week over the next six months. This
would effectively raise total capacity to about 58 testers by 3QFY17. We
are encouraged by this, as it demonstrates that Inari is starting to benefit
from the Avago-Broadcom merger and that it has successfully ventured
into enterprise and network infrastructure chip testing, diversifying its
exposure beyond smartphones.
5) Management also shared that Inari is in discussions with its partner PCL
Technologies to finalise the location of their new facility in China.
Management expects the new facility to be ready in 2H17. We like
management’s strategy of capitalising on its expertise in RF testing to
expand in China as this would diversify its earnings and address investors’
concerns about Inari’s customer concentration in Broadcom.
6) There were no surprises from the visit but we foresee an exciting earnings
outlook for Inari in FY17, driven by resilient increase in smartphone RF
content, new IISB earnings, and stronger earnings contribution from ISL.
Management targets 18% revenue growth for FY17.
7) Overall, maintain Add rating on the stock, with an unchanged target price of
RM3.15, still based on 13x P/E, similar to sector average. We see potential
re-rating in view of higher RF content growth per smartphone, improving
industry sentiment with successful new smartphone model launches and
sustainable margin expansion at Amertron.