Inari Amertron - Earnings Base To Be Diversified

It is involved in the electronics manufacturing systems industry. The group provides semiconductor components, packaging and testing services as well as manufacturing optoelectronic equipment. In addition, it had diversified into the electronics test and measurement segment as well as fibre optics components manufacturing.

It had established a partnership with Avago Technologies. Avago is Inari Amertron’s single largest customer contributing 70% of its current (June 2014) total sales. These mainly comprise key services like package assembly and testing. Of note, Avago RFICs are among the most reliable in the world and Inari Amertron is poised to benefit from this by virtue of being one of Avago’s three main RFIC assembling and testing contractors. Meanwhile under its optoelectronics arm, the group manufactures products like LED amd IR sensors for Avago.

To diversify its earnings base, Inari had ventured into the ETM business via its 51% owned Ceedtec Sdn Bhd. The latter is being incubated to become an ODM for Agilent Technologies. The group has also moved into research, design and manufacturing of fibreoptics related products through its 100% owned Inari South Kytech Sdm Bhd. The latter commenced production of a new fibreoptics component for Avago in Jan 2014.

Estimate that these two new divisions should contribute 15% to 20% of Inari Amerton’s total revenue by financial year 2016.

The group is comparable to a number of semiconductor manufacturing.

Its prospects are exciting going forward due to its new business ventures mature and bear fruit at the right time.

Its current valuations (06 June 2014) also implies a 21% premium to its listed peers like Gtronics, MPI and Unisem. However it is justified given that Inari Amertron’s heavier on the smartphone and tablet segment via its relationship with Avago as well as the relatively more exciting growth prospects due to new business opportunities.