Update: Inari Amertron (INRI MK; BUY; TP: MYR4.15) - Getting ready for next sprint

Inari Amertron (INRI MK; BUY; TP: MYR4.15) - Getting ready for next sprint

• Prelude to a new job win? Inari’s latest plant acquisition signals an imminent job win, possibly from its biggest client, Broadcom Ltd (previously Avago Technologies). Together with its unutilised 5.05-acre land in Batu Kawan, Inari is able to tender for new jobs (i.e. back-end semiconductor jobs for Osram’s EUR1b chip plant investment in Kulim, Broadcom Ltd – merged entity of Avago and Broadcom), ensuring its future growth and diversifying its portfolio.

Ex-net cash, Inari trades at 13.6x CY16 PER, offering a 27% upside to our MYR4.15 TP. Reiterate BUY; Inari is our Top Pick in the sector.

• Expect 2QFY6/16 to be strong. Inari’s 2QFY6/16 results, due out on 23 Feb, are likely to meet expectations, at MYR45m-50m net profit (-2%-+9% QoQ, +10%-22% YoY) on the back of strong orders and positive USD exposure (USD/MYR average: 4.28 in 2QFY6/16 vs 4.05 in 1QFY6/16). Pending results, our forecasts remains unchanged.