FW: Technology - Hardware (NEUTRAL): Little impact from floods in Penang, News on Broadcom & Qualcomm merger

 

 

Just a quick comment on the flood situation in Penang over the weekend. Also, our regional analyst have written a note on the potential mega merger between Broadcom and Qualcomm.

Technology - Hardware (NEUTRAL): Little impact from floods in Penang

• No direct hit for all MY tech-related companies within our coverage. Heavy downpour over a prolonged period resulted in some landslides and severe flooding in the Pulau Pinang (island + mainland), Perak as well as Kedah. Amongst our coverage, we note that operations for all three corporates (Inari Amertron, Globetronics Technology and ViTrox Corp) on the island are unaffected. However, we do expect some setbacks especially on logistics as well as staff whose homes were affected. While the heavy downpour have subside, on-going rain (based on weather forecast) could hinder the immediate clean-up process. We also note that the local government have seek assistance from the Federal government to stabilize the situation. Pray for Penang!

1.    Inari Amertron (INRI MK; BUY; TP: MYR2.98) – Operations unaffected

2.    Globetronics (GTB MK; SELL; TP: MYR5.50) – Operations unaffected

3.    ViTrox Corp (VITRO MK; SELL; TP: MYR4.20) – Operations unaffected

4.    Elsoft Research (ELSR MK; Not-rated) – Operations unaffected

5.    MMS Ventures (MMS MK; Not-rated) – Operations unaffected

6.    Pentamaster (PENTA MK; Not-rated) – Operations unaffected

7.    PIE Industrial (PIE MK; Not-rated) – Operations unaffected

8.    Uchi Technologies (UCHI MK; Not-rated) – Operations unaffected

 

Inari Amertron (BUY; TP: MYR2.98): A beneficiary of potential merger between Broadcom and Qualcomm

• More job wins in the pipeline. Broadcom group of companies is a major contributor to Inari’s revenue; 71% of FY17 revenue. The potential mega merger, if it materializes, would likely see Inari being one of the beneficiaries from more jobs outsourced from the combined entity (Broadcom’s business model – merge, dispose unwanted/unrelated/unprofitable entities, outsource works to OSAT to reduce costs). For instance, in the merger between Avago and Broadcom, Inari was able to win an outsourcing work for the multi-signal traffic controller components from Broadcom’s side of business.

Initial analysis of the merger in the attached report; Stefan is also CC’ed in this email to answer questions on the merger itself.

 

Broadcom & Qualcomm updates: https://www.cnbc.com/2017/11/05/broadcom-is-preparing-to-make-an-offer-to-qualcomm-as-early-as-monday.html

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