Inari Amertron to grow presence in China

KUALA LUMPUR: Inari Amertron Bhd could be poised to capitalise on growth opportunities in China as it enters into a partnership with a venture capital firm incorporated by the country's top contract chipmaker.

Inari announced on Monday that it had inked a memorandum of undertanding to set up a joint venture with China Fortune-Tech, a unit of Semiconductor Manufacturing International Corporation, to carry out outsourced semiconductor assembly and test-related businesses in China.

In a note, Kenanga Research said it is bullish on the development as the group continues to diversify and increase its revenue stream.

"In addition to its solid track record with western customers, this move will allow the group to grow its presence in China and ride the growth opportunities in the region given the ambitious goal of the Chinese government to achieve self-sufficiency (currently 16% vs its 70% target) in the semiconductor industry," it added.

The new JV company will require a total capital of RMB1.71bil (RM1.11bil), where Inari will contribute 100% equity shares in its wholly owned subsidiary Ametrtron Technology (Kunshan) and RMB463mil cash while CFTC will contribute RMB749mil cash and RMB21mil as 100% of equity shares in Yiwu Semiconductor International Corporation.

Inari will have a 55% stake in the JV while CFTC holds the remaining 45%.

"Using the group’s existing facilities in Amertron Technology (Kunshan), the new JV will be able to accelerate the qualification process for new customers before moving into a new plant when the need arises.

"While Inari has yet to provide further information on its potential customers and products involved in the new JV, we opine that it is likely related to the optoelectronic segment, mainly in the automotive space, in line with the expertise in its Kunshan plant," said Kenanga.

The research house maintained its FY21 and FY22 net profit forecasts of RM394mil and RM451.8mil respectively as it is yet to factor in any contribution from the MoU at this juncture.

It reiterated its "outperform" call and target price fo RM4.80 based on 40 times FY22 price-earnings ratio at plus-two standard devision of three-year mean.

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