Inari Amertron’s 9MFY16 results below expectations
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Inari Amertron’s 9MFY16 results below expectations
Inari Amertron’s 9MFY16 results below expectations
By Hong Leong Investment Bank Research / The Edge Financial Daily | May 20, 2016 : 10:13 AMThis article first appeared in The Edge Financial Daily, on May 20, 2016.
Inari Amertron Bhd
(May 19, RM2.73)
Maintain hold with a target price (TP) of RM3.57 under review: Inari Amertron Bhd’s nine months of financial year 2016 (9MFY16) sales of RM786 million translated into a disappointing core net profit of RM112 million, accounting for 61% and 69% of Hong Leong Investment Bank Research’s and the street’s full-year forecasts respectively.
Inari Amertron declared a third single-tier dividend of one sen (third quarter of FY15: 2.1 sen) per share, which will go ex on June 8.
Its sharp performance reversal was mainly due to scaled-back orders by its major customer and an inventory adjustment in view of the dismal global smartphone market.
Citing Gartner’s latest report, the global semiconductor market is expected to decline 0.6% year-on-year (y-o-y) in 2016, due to weakened demand for key electronic equipment, elevated inventory levels and a stronger US dollar.
Global mobile device sales are estimated to reach 2.4 billion units in 2016, a negligible growth of 0.6% y-o-y, but sales value is projected to decline 1.6% y-o-y.
Inari Amerton’s investments in new projects and partnerships will start to contribute positively from FY17.
Catalysts are wireless communications, mobility, Internet of things (machine to machine); long-term evolution; business diversification into optoelectronics, test and manufacturing; favourable foreign-exchange (forex) gains; and a continuous effective operational strategy.
Risks include forex risks, patent disputes, resources and labour shortages.
Positives are the appreciation of the greenback, a 40% dividend payout providing reasonable yield and strong earnings growth. Negatives include innovation stalemate in telecommunications.
Its current TP is pegged to unchanged 15 times calendar year 2016 earnings per share. — Hong Leong Investment Bank Research, May 19
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