Inari Amerton maintained at ‘buy’


INARI AMERTON BHD

By Affin Hwang Capital Research

Buy (maintained)

Target price: RM3.54

INARI Amerton Bhd’s fourth quarter financial year 2016 (FY16) earnings rebounded from its third quarter FY16 lows, which lifted FY16 core earnings to RM153mil.

Affin Hwang Capital Research said this was within expectations and that the fourth quarter FY16 core earnings rose 49% quarter-on-quarter (q-o-q), partially due to the low base.

It said inventory was eventually replenished, while revenue grew 17% q-o-q mainly due to improvement in its radio frequency (RF) business, which made up half of Inari’s revenue.

“We understand that utilisation levels at its RF segment recovered to 65% by end-June, compared to an average of 50% in third quarter FY16.

“On the whole, the beter FY16 earnings were underpinned by revenue growth (12% year-on-year) and margin expansion, which was aided by the stronger US dollar,” said Affin Hwang.

It noted that the FY16 earnings before interest, taxes, depreciation and amortisation (Ebitda) margin improved to 19.8% versus 18% a year ago due to currency gains, but also likely due to new product dveelopment from the RF segment.

Inari also announced a final dividend per share (DPS) of 2.2 sen (FY16 DPS of 8.4 sen from 8.9 sen in FY15).

Affin Hwang made slight changes to its 2017 to 2018 earnings per share (EPS) after incorporating the full-year financials and introduced its 2019 EPS forecast of 25.5 sen.

It kept its ‘buy’ call and target price of RM3.54, stating that it liked the RF growth story, which would be led by 4G adoption.

IJM Corp Bhd

by RHB Research

Buy (Maintained)

Target price: RM3.81

RHB Research has kept its ‘buy’ call on IJM Corp Bhd, with a slightly lower target price of RM3.81 after accounting for lower earnings estimates and an updated weighted average cost of capital assumption.

RHB Research said that IJM’s prospects were strong, underpinned by a record construction orderbook.

A record RM8.5bil outstanding construction order book should keep IJM busy for the next five years.

However, it said the company continued to bid for new jobs, while being selective in doing so.

RHB said IJM also enjoyed consistent income stream from its toll road concessions.

Meanwhile, throughput at Kuantan Port plunged following the ban on bauxite mining that affected its first quarter FY17 (March) earnings.

“We expect throughput to eventually recover after the second half of FY17 as the mining ban ends on September 14, 2016,” it added.

RHB said after trimming IJM’s port and plantation estimates, it cut the latters FY17 to FY19 forecast earnings by 0.7% to 14.7%, respectively.

Key risks include, an extended moratorium on bauxite mining in Pahang that could impact Kuantan Port’s throughput and earnings, delays and cost overruns from construction jobs, and a prolonged slowdown in property market.

Kawan Food Bhd

By CIMB Research

Add (Maintained)

Target price: RM 5.56

CIMB Research has maintained its ‘add’ call on Kawan Food Bhd, with a higher target price of RM5.56 from RM3.50, previously.

The research house said Kawan Food’s first half 2016 revenue grew 18.9% year-on-year (y-o-y) as sales was up for markets except Europe.

But its first half 2016 net profit growth was 6.3% lower mainly due to a RM3.3mil foreign exchange (forex) loss in the first quarter of 2016 and a RM1.3mil forex gain in the second quarter 2016 due to the strong US dollar.

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