Strategic tie-up set to boost Inari’s revenue stream

PETALING JAYA: Inari Amerton Bhd is set to further expand its operations in China and boost revenue stream, given its latest strategic partnership with a venture capital group there.

Analysts are generally positive on Inari’s memorandum of understanding (MoU) with China Fortune-Tech Capital Co Ltd (CFTC) to set up a joint-venture (JV) company in China, offering outsourced semiconductor assembly and test (OSAT)-related businesses.

MIDF Research, which is maintaining a “buy” call on Inari, said: “We are revising our revenue and earnings estimates by 5% and 5.4% for financial year 2022 (FY22) and FY23.”

It also derived a new target price for Inari at RM4.51, which is pegged to FY22 earnings per share of 12.8 sen against forward price-to-earnings ratio of 35.2 times.

“The premium valuation is justified due to anticipation of a prolonged upcycle in the semiconductor industry,” the research house said in its latest report.

Under the JV, Inari will deliver expertise and operational leadership to grow Amertron Technology (Kunshan) Co Ltd and also at new plant sites in China, said MIDF Research.

Inari will also provide relevant and continuing technical assistance as well as knowledge in OSAT manufacturing operations for the JV expansion in China.

CFTC, which has wide experience in private equity fund management, will provide expertise, networking and guidance to the JV company on opportunities including sales, marketing strategy, business development and risks within the regulatory frameworks of China.

Kenanga Research, in its latest report, said it believed that Inari was identified by CFTC due to its excellent track record in the OSAT space and its capabilities, which often attract large multinational corporation customers.

The research house is positive on the MoU as the Inari group continues its efforts to diversify and increase its revenue stream.

In addition to its solid track record with Western customers, Kenanga Research noted that the move will allow Inari to grow its presence in China and ride the growth opportunities in the region, given the Chinese government’s ambitious goal to achieve self-sufficiency in the semiconductor industry.

The research house is maintaining its net profit forecasts for Inari at RM394mil for FY21 and RM451.8mil for FY22.

“We have yet to factor in any contribution from the MoU at this juncture,” it added.

Kenanga Research has also reiterated an “outperform” call on the group with a target price of RM4.80.

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