Inari Amertron Bhd

PRIMARILY an electronics manufacturing services (EMS) provider, Inari (Fundamental 2.7/3, Valuation: 2.1/3) is involved in back-end semiconductor packaging including back-end wafer processing, package assembly and radio frequency (RF) final testing. 

The company expanded into opto-electronics and fiber optic manufacturing with the acquisition of Philippines-based Amertron Global Inc in 2013. The latter serves the high-growth wireless and mobile technology sectors, producing key components in leading brands of smartphones and tablets.

Inari operates nine facilities in Malaysia, China and the Philippines, employing about 5,000 workers. Notable clients include Avago Technologies, Osram, Lite-On and Sigmatron International. It has allocated RM45 million for capital expenditure in FY June 2015, including a new 166,000 sq ft plant in Bayan Lepas Industrial Zone, Penang. 

For FY2014, sales more than tripled to RM793.7 million due to the sales consolidation of Amertron, higher demand for wafer processing services, and chip assembly and testing services under the RF and opto-electronic segments. Pre-tax profit, meanwhile, surged 147.0% to RM106.9 million.

The company has a solid balance sheet with net cash of RM83.7 million or 12 sen per share at end-Dec 2014 (FY2011: RM8.8 million). From FY2011 to FY2014, sales and pre-tax profit grew by compounded annual growth rate (CAGR) of 87.9% and 73.5%, respectively. Shareholders’ equity increased by a CAGR of 78.5% to RM258.2 million during the same period.

For 1H2015, sales increased 19.0% y-o-y to RM449.8 million while pre-tax profit rose 52.1% to RM73.9 million, mainly due to higher trading volumes especially the RF segment that benefitted from high demand for smartphones and mobile devices.

The stock is selling at a trailing 12-month PE ratio of 16.8 times and 6.2 times book. Dividends totalled 6.8 sen per share in FY2014, translating into a yield of 2.2%.

This article first appeared in The Edge Financial Daily, on March 4, 2015.