JV may be first of many opportunities for Inari Amertron

TheEdge Tue, Sep 17, 2019 10:05am - 4 years View Original


Inari Amertron Bhd
(Sept 13, RM1.74)
Maintain buy with an unchanged target price (TP) of RM1.79:
In an announcement, Inari Amertron Bhd said it is entering into a joint venture (JV) with PCL Technologies Inc in Malaysia to secure, manage and manufacture optical transceivers and other related products. We are not entirely surprised by this announcement as the management had guided they would be filling the empty Plant P34 with some 600,000 sq ft of space.

The JV partner is not new, as Inari Amertron had previously owned a 9.7% stake in PCL. It subsequently sold down that position, although judging from this JV, the business relationship, despite having not materialised back then, seems to have blossomed. We understand that the JV will eventually take up 100,000 sq ft at P34.

As PCL’s optical products are already on the market and data centre related, we view the product transfer and actual commencement of commercial production should be fairly quick. Based on the announcement, for the first half of financial year 2019, PCL’s revenue was TW$1.181 billion (RM160.1 million) and profit was TW$129 million. Take note that we had yet to incorporate any contribution from P34 into our forecasts.

While the near-term profit contribution from this JV may not seem meaningful to Inari Amertron, we think this could be the first of many other opportunities for the company. We suspect the impact of trade tensions could be a motive behind this partnership, hence we believe there could be greater outsourcing opportunities, especially for well-established and well-managed outsourced semiconductor assembly and test such as Inari Amertron.

We maintained our “buy” rating and 12-month TP of RM1.79 on Inari Amertron based on a target price-earnings multiple of 20 times on calendar year 2020 earnings per share. — Affin Hwang Capital, Sept 12

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






Related Stocks

INARI 3.160

Comments

Login to comment.