Inari Amertron (INRI MK; BUY; TP: MYR4.10) - Enabler of future applications

We have a NDR note on Inari today.

Inari Amertron (INRI MK; BUY; TP: MYR4.10) - Enabler of future applications

• Winning never gets old. We recently hosted Inari’s CEO, Mr Lau Kean Cheong, on a 1-day NDR in Singapore to meet 12 fund managers. While feedbacks on its existing operations were positive, there were some concerns on Inari’s venture into the iris recognition segment whereby adoption is still at infancy stage. Nonetheless, we are confident that Inari is on a growth path, riding on necessary demand for its key client’s products (i.e. RF, fibre-optic & IR components) to power data-intensive applications of the future (i.e. 4k/8k UHD TVs, NFC payment, driverless cars). Reiterate BUY with an unchanged MYR4.10 TP, pegged at 17.5x CY17 EPS (+1SD).
• Will iris recognition be an instant hit? Growth in online shopping is nothing short of remarkable with Alibaba smashing its own sales record in the recent single’s day (11 Nov 2016) with USD17.8b sales (+24% YoY) recorded in just one day (vs USD14.3b on 11 Nov 2015). Such surge is a cause for e-payment security concerns which question the sufficiency of traditional passwords and finger-print IDs. While the recent introduction of an iris scanner (featured in Samsung Galaxy Note 7) offers a more secured alternative, there are doubts on whether the iris scanner would be an instant hit to benefit Inari’s venture into the IR LED components for the scanners.
• A high conviction BUY pick. Further boost from the fibre-optics and IR LED divisions could potentially raise our current estd. 3-year earnings CAGR of 19%. Additionally, the USD’s strength is in Inari’s favour. Reiterate BUY.