Inari procures land for expansion

by **Cals** Mon 18 Aug 2014, 22:18

Business & Markets 2014

Written by HLIB Research

Monday, 18 August 2014 09:57

Inari Amertron Bhd
(Aug 15, RM3.33)
Maintain buy with target price of RM3.41: Inari Amertron Bhd’s wholly-owned subsidiary, Simfoni Bistari Sdn Bhd, has entered into a sale and purchase agreement with Penang Development Corp (PDC) for the acquisition of a piece of leasehold, industrial land for a total purchase price of RM7.8 million, derived based on a willing seller, willing buyer basis.
The land is located at Plot 315, Batu Kawan Industrial Park, Daerah Seberang Perai Selatan, Pulau Pinang with a an area of 5.05 acres (2.04ha). The land has a 60-year unexpired term with express condition that it shall be used for electronics manufacturing.
The land is deemed strategically located with close proximity to its existing factories in Bayan Lepas Free Trade Zone and the Penang Second Bridge.
The company plans to construct new manufacturing facilities to expand the existing businesses and future business opportunities.
There is no funding concern as Inari has RM52.5 million in cash as as at the third quarter of financial year 2014 ended June (3QFY14).
This is not surprising as it announced this intention [confirming our earlier belief] along with the proposed renounceable rights issue with detachable warrants last month.
The majority of the rights issue proceeds will be allocated for capital expenditure to expand production capacity (plant extension, acquisition of land, factories, equipment and machinery) with a budget of RM60 million to RM80 million, followed by repayment of bank borrowings amounted to RM20 million and the remaining RM18 million to RM31 million as working capital.
This expansion is crucial to drive future growth as Radio Frequency’s new Plant 5 is already running at near full capacity or a utilisation rate of 85%, although it was recently expanded. — HLIB Research, Aug 15

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This article first appeared in The Edge Financial Daily, on August 18, 2014.
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