KUCHING: Inari Amertron Bhd (Inari), whose first quarter of the financial year 2015 (1QFY15) earnings met analysts’ expectations, is likely to do well in the booming tech space.
According to the research arm of Maybank Investment Bank Bhd (Maybank IB Research), it left its forecasts unchanged and sees huge potential in Inari’s new plant, set to commence operation in February 2015 with an additional 80-90 test handlers for its radio frequency (RF) division. Maybank IB Research noted that as at end-October 2014, Inari operates 460 units of test handlers.
“Bigger capacity is essential to support increasing orders from Avago (Technologies) driven by higher-than-expected demand for new smart devices launched,” it said.
The research arm further noted that Inari is a beneficiary of the stronger US$ against the RM as over 90 per cent of its revenue is denoted in US$ versus just 70 per cent of its cost of goods sold (COGS).
“Currently, the US dollar to ringgit rate is three per cent above our forecast of US$1 fpr RM3.25. Our sensitivity analysis suggests a seven per cent upside to earnings on a full-year basis should the current rate remain,” it said.
With Inari having recorded an unbroken streak of net profit growth for the last 10 quarters, Maybank IB Research believes that earnings will continue to gain traction going forward as its new capacity starts to kick in by the third quarter of financial year 2015.
Overall, Maybank IB Research continues to like Inari for its near-term earnings prospects in the booming tech space. It thus reiterated ‘buy’ with an unchanged cum-rights target price of RM4.20 per share based on 17-fold current year 2015 price earnings ratio, offering a 46 per cent upside.
With Inari’s results largely in line, RHB Research Institute Sdn Bhd also made no changes to its FY15-17 earnings estimates.