PETALING JAYA: Inari Amertron Bhd
’s decision to terminate its proposed acquisition of Lumileds International is seen as a near-term positive, as it removes a key earnings overhang despite lingering operational headwinds, says CIMB Research.
The deal, which involved a joint acquisition with Sanan Optoelectronics Co Ltd, was called off after the Committee on Foreign Investment in the United States (CFIUS) raised unresolved national security concerns and requested the withdrawal of the filing.
CIMB Research noted the exit eliminates any exposure to Lumileds’ loss-making operations.
Based on publicly available figures, Lumileds recorded net losses of US$67mil in the financial year 2024 (FY24) and US$17mil in the first quarter of 2025.
“The withdrawal eliminates the risk of near-term earnings drag from a loss-making entity,” it added.
However, the research house cautioned that Inari’s earnings recovery may remain limited in the near term.
The group’s radio frequency (RF) segment is expected to face subdued demand in the first half of 2026 due to seasonally softer loadings ahead of next-generation device launches later in the year.
That said, growth in other segments could provide some support.
Inari is expected to benefit from rising demand for fibre optic transceivers, driven by increased data centre investments and the need for higher interconnect capacity.
CIMB Research maintained a “hold” call on the stock with an unchanged target price of RM1.65, based on 25 times price-to-earnings.
“While the company’s balance sheet remains strong and management continues to explore alternative merger and acquisition opportunities, the current valuation is fair given the challenging near-term outlook,” CIMB Research said.
Meanwhile, RHB Research said the termination is neutral to fundamentals but could be slightly positive for investor sentiment. The deal’s cancellation does not alter RHB’s earnings outlook as the acquisition had not been factored into its forecasts.
“We view this development as neutral to fundamentals but mildly positive for sentiment,” it said, as the market had previously adopted a cautious stance on this proposed deal.
RHB Research maintained its “buy” call on Inari, raising its target price to RM2.01 from RM1.81 per share, implying a 22% upside alongside an estimated 3% dividend yield for FY26.
It highlighted the acquisition could have offered longer-term benefits: including revenue diversification, improved return on equity and greater vertical integration through collaboration with Sanan Optoelectronics.
Moving forward, RHB Research expects FY26 to remain a softer year, weighed down by lower RF component allocations and a weaker US dollar.
However, it noted cost rationalisation efforts and natural hedging are expected to provide some support.
“Coming off a low base, FY27 is shaping up to be a significantly better year,” the research house said.
It expects stronger RF allocations driven by a new smartphone cycle, including potential adoption of in-house 5G modems, increased volumes from foldable devices and supplier diversification trends.
In addition, the group’s datacom segment continues to gain traction, supported by rising demand for laser chips used in energy-efficient data centre connectivity.
RHB Research added it raised its valuation multiple to reflect improved sentiment following the removal of deal-related uncertainty, as well as growing investor focus on longer-term growth catalysts.
