We maintain BUY call on Inari Amertron (Inari) and fair value (FV) of RM3.72/share, pegged to an unchanged CY23F PE of 25x, which is 0.5 standard deviation below its 5-year mean of 28x. We continue to ascribe a 4-star ESG rating, which translates to a 3% premium to Inari’s FV (Exhibit 3).
Broadcom has secured a new multibillion-dollar agreement with a North American smartphone maker to develop 5G radio frequency (RF) components including Film Bulk Acoustic Resonator (FBAR) filters and cutting-edge wireless connectivity components.
This is in line with our base case scenario that Broadcom will continue to play a key role in the North American smartphone maker’s supply chain, particularly related to its core strength – the RF chips.
Therefore, we retain FY23F-FY25F earnings. Recall that RF contributed 62%-64% of Inari’s revenue in recent quarters.
The group’s long-term prospects stem from: i. the resilience of its radio frequency (RF) earnings and margin due to higher chip complexity in 5G devices and applications; ii. the company’s plans to enhance and diversify revenue streams via joint ventures in outsourced semiconductor assembly and test manufacturing operations in China; and iii. formidable net cash position of RM2bil as at December 2022, which translates to 24% of its market capitalisation.
However, a worse-than-expected slowdown in demand from the mobile device segment due to a global economic recession may pose downside risks to our earnings forecast and fair value.
The strengthening of MYR against US$ will also be unfavourable to the group given that exports account for 95% of 1HFY23 sales.
The stock currently trades at an attractive FY23F PE of 18x vs its 5-year mean of 28x and offers a decent dividend yield of 3%.
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....