Inari Amertron can double contribution from ATK in FY23F following OSAT JV in China

KUALA LUMPUR, Oct 20 -- Inari-Amertron Bhd's memorandum of understanding (MoU) with China-Fortune-Tech Capital Co Ltd (CFTC) could double the financial year 2023 forecast (FY23F) contribution from Amertron Technology (Kunshan) (ATK) following its new capacity expansion to support the new China outsourced semiconductor assembly and test joint venture (OSAT JV).

Hence, CGS-CIMB Securities Sdn Bhd has raised its financial year 2022-2024 forecast earnings per share (FY22-24F EPS) by 2.0 to 5.0 per cent.

"We reiterate our 'add' call with a higher target price of RM4.50 as we rollover our valuation to end-2022," it said in a research note today.

The firm said new earnings-accretive OSAT JV in China, stronger-than-expected radio frequency (RF) chip demand, consensus earnings upgrades, new customer wins, and potential inclusion into FTSE Bursa Malaysia KLCI (FBM KLCI) Index are potential re-rating catalysts for the stock.

Meanwhile, slowing demand for 5G smartphones, ringgit appreciation against US dollar and delays in customers’ wafer shipments due to supply shortages are key downside risks to its 'add' call, said CGS-CIMB.

Previously, Inari announced that the company had entered into an MoU with CFTC to set-up a JV in China to carry out OSAT manufacturing service for the China market.

Under the MoU, Inari will be injecting RMB463 million (RM300 million) cash and contribute 100 per cent of ATK equity shares into OSAT JV.

Meanwhile, CFTC will contribute a new cash investment of RMB749 million (RM486 million) and 100 per cent equity shares of Yiwu Semiconductor International Corporation valued at RMB21 million (RM14 million).

Upon completion, Inari will own a 55 per cent equity stake in the JV while CFTC will own the remaining 45 per cent.

As at 11.32 am, Inari gained 0.12 sen to RM3.92 with 24.79 million shares transacted.

-- BERNAMA