KUALA LUMPUR: There is reprieve for Inari Amertron Bhd following FTSE Russell's announcement that there will be no changes to the constituents of the FBM KLCI for the June 2022 review.
The development defied market expectation that the semiconductor manufacturer would be removed from the blue-chip index following its decline in market capitalisation, said Kenanga Research.
"This comes as a positive surprise given that the market was expecting its deletion, which explains the selling pressure over the past few months.
"With FTSE confirming its KLCI status, we believe the sentiment overhang has been lifted, and see a good reason for the earlier weakness to be reversed," it added in a note.
According to Kenanga, while Hap Seng Consolidated met the market cap requirement, it failed the liquidity test for inclusion on the index.
"If a non-constituent does not turn over at least 0.05% of their shares in issue (after the application of any investability weightings) based on their median daily trading volume per month for at least 10 of the 12 months prior to the semi-annual review, it will not be eligible for inclusion in the index," noted Kenanga.
Inari's shares had lost 41.5% of their value from Nov 22, 2021, to May 24, 2022, in line with the broader decline in the local and global tech sectors.
However, the stock bounced 12.67% over the final week of May to halt the correction.
At 9.36am, shares in Inari were trading unchanged at RM2.84 on volume of 3.17 million units.
Meanwhile, Kenanga expects Inari to achieve slight sequential quarterly growth in 4QFY22, which is in line with the group's expectation of a satisfactory quarter to close the financial year.
It said US smartphone production is expected to remain stable despite increasing supply chain challenges from China's lockdown.
"We maintain our forecast for FY22E and FY23E CNP. Maintain 'outperform' with an unchanged target price of RM3.30 at 28x FY23E PER, representing +0.5SD to its 5-year mean," said Kenanga.