RHB Research has made a “Buy” recommendation for Inari Amerton Bhd with a target price of RM3.59.
It adds that it is a compelling BUY into the only technology stock in the FBM30 – at its current valuation of 25x – supported by its earnings visibility on 5G play and improvements in the optoelectronic segment.
The stockbroking firm said that following the federal funds rate (FFR) hike and upward revision of our in-house FFR forecasts to 1.75-2.0% (from 1%) by the end of 2022, and 2.25-2.50% (from 1.5%) for the end 2023, it
Following the first FFR hike and upward revision of our in-house FFR forecasts to 1.75-2.0% (from 1%) by the end of 2022, and 2.25-2.50% (from 1.5%) for the end of 2023, it takes the opportunity to build in the new expectations and cut our CY22F target P/E for Inari to 31x (+1SD from the 5-year mean) from 40x (+3SD from the 5- year mean). “Our TP is cut to MYR3.59 after applying a 2% ESG premium, based on our proprietary ESG methodology and Inari’s ESG score of 3.10,” RHB said.
RHB said that YTD share price weakness of 24% was on the back of the sector’s derating on high inflation and the rising yield expectations.
“Nonetheless, with the FFR realised, and aggressive policy tightening being priced in, we believe it is an opportunity for investors to accumulate the only technology stock in the FBM KLCI at only 25x FY23 P/E, given its growth visibility which stems from; the mid-term structural growth of the 5G story and the growing demand for semiconductor chips; and a iii) rock-solid balance sheet.
