Inari Amertron Bhd
(Dec 8, RM3.30)
Maintain buy recommendation with an unchanged target price of RM4.10: We recently hosted Inari Amertron Bhd chief executive officer Lau Kean Cheong at a one-day Non-Deal Roadshow in Singapore to meet 12 fund managers. While feedback on its existing operations was positive, there were some concerns about Inari’s venture into the iris recognition segment whereby adoption is still at the infancy stage.

Inari’s partnership with Broadcom Ltd is one that carries long-term visibility, in that the latter is anchored on the growth of infrastructure spending for faster cellular networks and data centres to support tomorrow’s advancement in technology applications, including cloud computing, ultra-high-definition streaming and industry 4.0.

Broadcom’s persistent penetration into the fibre optic segment through a series of acquisitions such as LSI Corp, CyOptics Inc and Brocade Communications Systems has enhanced its position as a market leader in this space. Following that, further outsourcing to its trusted vendors will benefit both parties in terms of scale and profitability.

The growth in online shopping is nothing short of remarkable with Alibaba Group Holding Ltd smashing its own sales record in the recent Singles’ Day on Nov 11 with US$17.8 billion (RM78.68 billion) in sales (up 24% year-on-year) recorded in just one day versus US$14.3 billion on Nov 11, 2015.

Such a surge is a cause for e-payment security concerns, which question the sufficiency of traditional passwords and fingerprint identification. While the recent introduction of an iris scanner (as featured in the Samsung Galaxy Note7) offers a more secure alternative, there are doubts on whether the iris scanner would be an instant hit to benefit Inari’s venture into infrared light-emitting diode components for the scanners. — Maybank IB Research, Dec 7