Inari Amertron (INRI MK; BUY; TP: MYR3.95): More Avago chips in Samsung Galaxy S6 and S6 Edge

Inari Amertron (INRI MK; BUY; TP: MYR3.95): More Avago chips in Samsung Galaxy S6 and S6 Edge

• What's New? Following the recent unveiling of the Samsung Galaxy S6 and S6 Edge, we noticed that there has been increase in the number of Avago RF chips from 1 chip in Galaxy S5 to 2 chips in Galaxy S6 and Galaxy S6 Edge as revealed in the teardown by iFixit and Chipworks:

Galaxy S6 Edge: http://www.chipworks.com/en/technical-competitive-analysis/resources/blog/inside-the-samsung-galaxy-s6/

Galaxy S6: https://www.ifixit.com/Teardown/Samsung+Galaxy+S6+Edge+Teardown/39158

Galaxy S5: https://www.ifixit.com/Teardown/Samsung+Galaxy+S5+Teardown/24016

• What’s our view? This is positive for Inari as guided by the management previously as Inari had invested in new capacity for its RF division in order to cater for Avago’s increase in orders. Management continue to guide for stronger volume for its RF division as production capacity in its new plant ramps up in the next 2 quarters.

Further strengthening of the USD also benefits Inari which is a net exporter in USD (90%/70% of its revenue/COGS in USD) - every 1% change in the MYR/USD is a 2.3% change to earnings.

Other catalysts: New product outsourcing by Avago following its recent acquisitions of fibre-related companies (i.e. CyOptics, LSI, PLX Technology, Emulex).

Reiterate BUY with an unchanged TP of MYR3.95, pegged on 16x CY16 PER. This offers a 16% upside and 2+% yields.