MPI aims upwards

WHEN Inari Amertron Bhd announced its intention to jointly acquire loss-making Lumileds Holding BV two months ago, investors reacted with scepticism, sending its share price tumbling.

But when Malaysian Pacific Industries Bhd (MPI) unveiled plans to buy Infineon Technologies’ loss-making Thailand unit, Infineon Technologies (Thailand) Ltd (IFTH), the response could not have been more different.

Both transactions involved assets in the red, yet MPI’s move met relative optimism.

Analysts say this divergence is less about the numbers, and more about MPI’s reputation for caution and long-term strategy.

The deal, worth US$77.9mil (RM328mil), is seen as an opportunity for MPI to broaden its horizons beyond Malaysia’s limited outsourced semiconductor assembly and test (OSAT) market, while deepening ties with a global semiconductor powerhouse.

“IFTH is loss-making mainly due to foreign exchange (forex)but it has sound operations,” RHB Research analyst Lee Meng Horng tells StarBiz 7.

“This is the first major M&A 9merger and acquisition) for MPI in five years or so. The group is known to be conservative and this should give some comfort to investors,” he adds.

For MPI, the strategic logic is clear. The Nonthaburi-based IFTH, established in 1984, employs over 1,000 workers and produces a broad range of semiconductor products including memory, microcontrollers, communications chips, and system-on-chip technologies.

While its FY24 results showed a net loss of 57 million baht (RM7.6mil) due to forex headwinds, the company was profitable a year earlier.

With advanced memory test systems and a 772,000 sq ft plant, IFTH adds immediate scale and cost-efficient testing capabilities.

Lee, in his recent report, upgraded his target price for MPI to RM35 from RM30.50, citing medium-term positives from the acquisition.

“It expands MPI’s semiconductor backend manufacturing footprint, secures a strategic tie with Infineon, and strengthens regional diversification.

“Despite the recent terrific share price run, we still like the stock for a stronger FY26 performance, technology roadmap, and strong footholds in high-growth segments,” he notes.

The deal also represents a deepening partnership with Infineon, one of MPI’s largest customers.

As Lee points out: “The MPI expansion strategy is a pivot to regional presence instead of just Malaysia. This acquisition can accelerate its expansion into Thailand.

“Infineon would prefer to focus on front-end operations while MPI can handle Infineon’s back-end businesses. With this deal, for any new product from Infineon, MPI will be given the preference to handle the back-end OSAT operations.

“With that, Infineon can redeploy its capital to the higher value-added front-end operation and product development,” he explains.

He adds that at 0.7 times price-to-book value (P/BV) (based on FY24 net assets), the price tag is undemanding, as setting up new facilities would probably consume more time and can be more expensive.

“Although the acquisition is implying an FY23 (financial year 2023) price-to-earnings (PE) multiples of 42 times, we reckon this is not a good evaluation yardstick to use during semiconductor down-cycle times,” he says.

CIMB Securities Research echoes the bullish stance, calling the 0.7 times P/BV valuation “an attractive entry below book value.” Analyst Mohd Shanaz Noor Azam concurs that the deal strengthens MPI’s partnership with Infineon, diversifies its footprint into Thailand, and opens scope for margin improvements at IFTH.

“We view the proposed acquisition as strategically positive and earnings-accretive for MPI. IFTH offers a ready offtake from Infineon, which is already one of MPI’s key customers, providing immediate volume support.

“Leveraging its established expertise in assembly and test operations, MPI has scope to drive operational efficiency at IFTH and lift margins closer to group levels,” he explains.

“Importantly, expanding into Thailand broadens MPI’s manufacturing footprint beyond Malaysia and China, enhancing supply chain resilience. While both Malaysia and Thailand face the same 19% reciprocal tariff rate, geographic diversification strengthens MPI’s appeal to prospective customers seeking to mitigate concentration risk in North Asia,” he explains.

Shanaz notes that MPI, with RM988mil net cash and proceeds from its RM140mil Dynacraft disposal, can comfortably fund the acquisition without raising debt.

He projects IFTH to contribute 8% to 12% of MPI’s FY27 and FY28 revenues, lifting core net profit compound annual growth rate to 24% over FY25 to FY28.

He, too, has raised his target price to RM35, reflecting both IFTH’s earnings uplift and catalysts from artificial intelligence (AI) data centres (DCs) and an automotive recovery.

Still, risks remain. Kenanga Research warns that MPI’s near-term outlook is clouded by US tariff policies, particularly in the automotive supply chain, and slashed FY25 to FY26 earnings forecasts by 21% to 27%.

Even so, it maintained an “outperform” rating, pointing to MPI’s long-term strengths in renewable energy semiconductors, silicon carbide and gallium nitride packaging, and power management chips for AI DCs.

Emerging bright spot

TA Securities highlights another emerging bright spot: demand for AI server packages.

Once a negligible part of MPI’s business, they contributed 9% of revenue in the second quarter of FY25, offsetting weakness in the automotive sector.

MPI’s new Suxiang plant in China and its expansion in Ipoh will also add capacity, while its strong RM1bil net cash gives it flexibility for further investments.

For MPI, the Infineon Thailand acquisition is more than just a regional expansion – it is a statement of intent.

By strengthening its relationship with Infineon, diversifying beyond Malaysia, and positioning itself in growth areas like AI and electric vehicles, the group is betting on the next wave of semiconductor demand.

In a sector buffeted by tariffs, cyclical swings, and intensifying competition, MPI’s conservative yet strategic move could prove prescient.

As one analyst summed it up: The market may be punishing others for risky bets, but MPI’s discipline has bought it something more valuable – investor trust.