Stock Name: INARI
Company Name: INARI BERHAD
Inari Bhd
IPO today with issue price 38 sen
Fair value of 41 sen: Inari Bhd is an electronic manufacturing services (EMS) company, through its subsidiary, mainly involved in back-end semiconductor packaging and complete box-build products.
The company has a three-proned strategy for its future which comprises:
(1) Expanding the customer base. Inari is looking to increase its customer base as well as new products and services. Already, it has secured new customers such as NewICT (M) Sdn Bhd, Wi2Wi Inc and SiLQ (M) Sdn Bhd to produce medical sensors, WiMAX modems and so on.
(2) Capacity expansion. The company is constructing a new manufacturing plant to cater for new businesses as well as to expand its R&D facility. Coupled with machinery upgrades and new machinery, the company plans to increase capacity by 35% to 40% by 2012.
(3) Setting up a technical advisory panel in order to keep up with the latest technology developments. This will allow the company to strengthen its R&D, which would allow enhancement of production capability in addition to providing additional services.
We forecast FY10/FY12 earnings per share (EPS) compound annual growth rate of 10.3%, mainly driven by: (i) higher sales volume of packaging services on the back of rising mobile phone and tablet demand; (ii) contribution from back-end wafer services; and (iii) stronger contribution from RF final testing in tandem with its packaging services and higher demand for stringent testing. Given its niche in the communications segment, we believe this mitigates concerns of weaker-than-expected chip demand in other segments such as consumer electronics and PCs in the near term.
We believe it is fair to compare Inari with global peers (against local packaging peers) in RF solutions and wireless given that it is mainly focused on the communications segment. We have derived a target price-earnings ratio of seven times, which implies a 44% discount to the peers' weighted average to reflect its smaller market capitalisation. Thus, we estimate a fair value of 41 sen per share based on seven times CY12 EPS. ' RHB Research, July 18
This article appeared in The Edge Financial Daily, July 19, 2011.
Company Name: INARI BERHAD
| Research House: RHB | Price Call: HOLD | Target Price: 0.41 |
Inari Bhd
IPO today with issue price 38 sen
Fair value of 41 sen: Inari Bhd is an electronic manufacturing services (EMS) company, through its subsidiary, mainly involved in back-end semiconductor packaging and complete box-build products.
The company has a three-proned strategy for its future which comprises:
(1) Expanding the customer base. Inari is looking to increase its customer base as well as new products and services. Already, it has secured new customers such as NewICT (M) Sdn Bhd, Wi2Wi Inc and SiLQ (M) Sdn Bhd to produce medical sensors, WiMAX modems and so on.
(2) Capacity expansion. The company is constructing a new manufacturing plant to cater for new businesses as well as to expand its R&D facility. Coupled with machinery upgrades and new machinery, the company plans to increase capacity by 35% to 40% by 2012.
(3) Setting up a technical advisory panel in order to keep up with the latest technology developments. This will allow the company to strengthen its R&D, which would allow enhancement of production capability in addition to providing additional services.
We forecast FY10/FY12 earnings per share (EPS) compound annual growth rate of 10.3%, mainly driven by: (i) higher sales volume of packaging services on the back of rising mobile phone and tablet demand; (ii) contribution from back-end wafer services; and (iii) stronger contribution from RF final testing in tandem with its packaging services and higher demand for stringent testing. Given its niche in the communications segment, we believe this mitigates concerns of weaker-than-expected chip demand in other segments such as consumer electronics and PCs in the near term.
We believe it is fair to compare Inari with global peers (against local packaging peers) in RF solutions and wireless given that it is mainly focused on the communications segment. We have derived a target price-earnings ratio of seven times, which implies a 44% discount to the peers' weighted average to reflect its smaller market capitalisation. Thus, we estimate a fair value of 41 sen per share based on seven times CY12 EPS. ' RHB Research, July 18
This article appeared in The Edge Financial Daily, July 19, 2011.
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