Inari: Growing Stronger

Inari FY14Q1 Financial Result

INARI	FY14Q1	FY13Q4	FY13Q3	FY13Q2	FY13Q1	FY12Q4
Revenue	191.3	67.6	56.8	62.1	54.6	41.8
PBT	22.1	13.5	8.3	11.3	10.2	3.8
PBT%	11.6	20.0	14.6	18.2	18.7	9.1
PAT	21.0	13.1	12.4	8.7	7.4	5.1
Total Equity	176.8	153.4	110.0	97.6	94.3	82.9
Total Assets	406.2	366.4	181.3	176.2	164.3	148.6
T/Receivables	121.1	93.0	38.6	36.8	39.5	24.4
Inventories	107.4	105.5	24.7	24.5	24.0	22.2
Cash	48.9	44.6	31.0	39.2	34.0	40.8
Total Liab	230.0	213.8	71.3	78.6	70.0	65.7
T/Payables	138.7	120.2	48.0	54.2	52.9	48.3
ST Borrow	19.6	20.4	5.5	4.6	4.6	4.5
LT Borrow	17.8	10.3	13.3	8.8	7.2	8.4
Net CF	4.3	3.8	-9.9	-1.6	-6.6	25.2
Operation	7.2	86.3	20.1	17.6	0.4	22.7
Investment	-9.6	-112.2	-31.1	-17.2	-4.9	6.1
Financing	6.8	29.7	1.1	-2.0	-2.1	-3.6
EPS	4.69	3.69	3.68	2.67	2.24	1.67
NAS	0.38	0.35	0.32	0.29	0.28	0.25
Net D/E	Net C	Net C	Net C	Net C	Net C	Net C

Inari posts a good FY14Q1 results, boosted by contribution from newly-acquired Amertron and its own organic growth.

It is true that Inari's revenue will increase by 3x (from RM67.6mil to RM191.3mil QoQ) after Amertron acquisition, while net profit increases 60% QoQ from RM13.1mil to RM21mil. However, PBT margin reduces from 20% to 11.6% due to low margin from Amertron.

Out of the RM191.3mil revenue, Amertron contributes RM120.1mil. The rest of RM71.2mil that comes from Inari itself represents a slight improvement from RM67.6mil in the preceeding quarter.

Anyway, there is a RM4mil foreign exchange gain in the PBT because of stronger USD in this quarter. Without this special gain, Inari's PAT this quarter should be around RM17mil.

If based on Amertron's profit in FY12 before the acquisition, it will contribute around RM3mil net profit a quarter.

In previous post I gave a very conservative net profit forecast for Inari, which is RM44mil for FY14. It seems like I need to recalculate my own target price for Inari.

I think RM17mil x 4 = RM68mil, round up to RM70mil,  should be a conservative and safe forecast for Inari's FY14 PAT. 

Thus, base on 456mil shares (excluding 190mil warrants expire in 2018), my EPS forecast is 15.4sen, and target price is RM2.30 base on PE of 15x.  The dilution effect of the warrants will be 30% once all converted by 2018 which is still 4-5 years to go.

I think Inari will not have big problem to achieve a net profit of more than RM70mil in FY2014.

Inari announces its first interim dividend of 1.10 sen plus a special dividend again at 0.4sen, giving a total of 1.5sen all single tier. The first interim dividend of 1.1sen represents a 37.5% increase from previous year's corresponding quarter (0.8sen).

Excluding the foreign exchange gain in this quarter, Inari's financial performance is still good but is largely expected without big surprise. However, its near future should remain bright and exciting.