Inari Amertron (INRI MK; BUY; TP: MYR3.20) - Set your eyes ahead

Inari Amertron (INRI MK; BUY; TP: MYR3.20) - Set your eyes ahead

• Recovery in motion. We believe that earnings have bottomed in 3QFY16 and should pick up in 4QFY16 on (i) higher RF shipment approaching a major smartphone launch in Sep 2016 and (ii) potential reversal of forex losses due to a weaker MYR. Minor tweak to earnings (<±1%) having raised DPR to 45%-50% from 40%.
• Key news to watch. (i) Broadcom’s (AVGO US, Not-rated) result on 2 June 2016, (ii) monthly revenue release by WIN Semiconductor (3105 TT, Not-rated) whose top clients are Avago, Skyworks & Murata according to our channel checks.
• Compelling risk-to-reward; Reiterate BUY. Inari’s share price has retraced by 30% from its peak (MYR3.80 on 30th Dec 2015) following the news of channel inventory rationalisation by a major smartphone player. As volume loading resumes its norm to meet the new launches in 2H16, this allays the concerns of a further shipment deferment by the components maker. Current price offers a decent entry point at 14x CY16 ex-cash PER (MYR211m net cash as at end-Mar 2016).