Inari rebounds after recent sell down

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KUALA LUMPUR (Oct 23): Inari Amertron Bhd's share price rebounded as much as 5.2% today, after a sharp plunge in the past three weeks.

At 4pm, the manufacturer of smartphone component’s share price increased 12 sen or 4.4%, with some 5.6 million shares having changed hands.

Inari is in the midst of making a cash call. The company has fixed its rights issue, which comes with free detacahable warrants, at RM1.50 per share. And the warrants’ exercise price is at RM2.

In a note today, RHB Research said the proceeds raised from the rights issue could help to expand its core businesses to propel earnings growth in the medium term.

The research house maintained a ‘buy’ call for the stock, with an unchanged target price of RM3.82 or RM3.10 post rights issue.

“The pricing of both its rights issue, as well as warrants, were in line with management’s previous guidance,” said RHB IB research analyst Kong Heng Siong.

He said upon completion of the rights issue and assuming full conversion of the new warrants, Inari’s share capital would expand to 797.7 million.

Meanwhile, Hong Leong Investment Bank Research’s analyst Tan J Young pointed out that Inari has rebounded in line with other local tech stocks, following the earlier selldown, on concern of a weak fourth quarter outlook.

“We don’t think the selldown was justified. We continue to place an overweight call on the semiconductor sector,” he commented over the phone.

Tan, however, noted that Inari was fundamentally ‘very strong’, adding that the firm had received orders beyond its production capacity. “Insufficient capacity is a good problem to have,” he quipped.

According to Tan, the sell down on Inari shares was due to a weak forward guidance by a US tech company — Microchip Technology Inc — which forecast lower sales on weak demand from China.

The stock had gained 74%, climbing from RM1.60 in January.