Inari Amertron Bhd
(April 19, RM1.78)
Maintain hold with a fair value (FV) of RM1.65: We maintain our “hold” call on Inari Amertron Bhd with a FV of RM1.65 per share. Our valuation is based on an unchanged calendar year 2019 price-earnings ratio forecast of 20 times, while maintaining our earnings forecasts.

 
Apple has agreed to pay Qualcomm an undisclosed amount as compensation for patent infringement, ending their two-year legal dispute. Apple inked a six-year licensing deal with Qualcomm and multi-year chipset supply.

Hours after Apple settled the dispute with Qualcomm, Intel announced that it would be exiting the 5G mobile modem business. It was unclear if Intel’s decision to drop out was due to Apple’s settlement with Qualcomm or if it was Intel’s exit from the 5G market that brought about Apple’s decision to settle with Qualcomm.

Apple’s original plan was to continue dual-sourcing for its modems from Intel and Qualcomm. However, due to a licensing dispute, Qualcomm refused to supply modems to the iPhone maker in 2018, which left Apple no choice but to rely solely on Intel’s modems for its 2018 models.

Qualcomm’s “no licence, no chips” policy forces customers to license its technology in order to obtain access to a supply of its hardware.

Business magazine Fast Company recently reported that Intel had been missing deadlines for its 5G modems slated to go into the 2020 iPhones. Already behind the curve and unlikely to adopt Huawei’s mobile modems, Apple settled with Qualcomm, which already has 5G mobile modems (Snapdragon X50 and X55) in place.

While this will speed up the adoption of 5G in Apple iPhones, we opine that the market will only see a 5G-enabled iPhone in 2020 due to timing issues. Historically, iPhone has proven to be behind its peers in adopting new technology, such as during the transition from 3G to 4G.

We are mildly positive about this development as it bodes well for Inari, which is in the supply chain for the smartphone radio frequency, a vital element for the adoption of 5G. — AmInvestment Bank, April 19