Inari Amertron (INRI MK; BUY; TP: MYR4.30) - Action-packed
- Enhancing its footprint in China. We are positive on Inari's joint venture with PCL Technologies which could possibly expand its addressable market in China for the fiber-optics products. Should Inari’s Kunshan plant be injected into the JV entity, this could optimize production of the plant which is currently underutilized. Earnings forecasts and MYR4.30 TP unchanged; reiterate BUY.
- Salient details of acquisition and JV with PCL. In an announcement to Bursa Malaysia, Inari has:
I.
Acquired a 9.7% stake (5m shares) in
PCL Technologies for TWD355m (MYR44.5m) cash. Based on annualised FY15 net
profi
II.
t of TWD251m, Inari is paying 14.6x
PER for this stake, fair in our view.
III.
Entered into a MOU with PCL to set up
a 50:50 joint-venture (USD20m initial capital), in China to provide OSAT
services. We understand that both Inari and PCL are vendors to Broadcom's
(previously known as Avago) wired division (industrial fiber-optics solutions)
which was sold to Foxconn Technology recently.
- Busy times ahead; improving earnings visibility. We expect Inari to be occupied over the next 2 years with new job wins (i.e. Broadcom & Osram potential outsourcing) and JV (i.e. PCL). These offers upside to our earnings forecasts and TP. Reiterate BUY.
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