PublicInvest Research Company Update
KDN PP17686/03/2013(032117)
INARI AMERTRON BERHAD Neutral
New Acquisition
Last week, Inari announced a partnership with China’s Sanan Optoelectronics Co to jointly acquire the entire stake in Lumileds International, including its 11 Asian and European subsidiaries, for an enterprise value of USD239m (RM1.03bn). This marks Inari’s maiden entry into the global LED market. However, we do not anticipate positive earnings contribution from this newly acquired entity in the near term as it is current in a loss-making position. Inari will invest a total of USD71.4m (RM307m) for a 25.5% stake and future working capital requirement. Given the limited upside potential, we downgrade our call to Neutral, maintaining our target price of RM2.30, based on 29x FY26 EPS.
- Salient details of the acquisition. The USD239m proposed acquisition will be fully satisfied in cash and executed through a special purpose vehicle (SPV) incorporated in Hong Kong. The Shanghai-listed Sanan (market cap: USD8.4bn) will own 74.5%, while Inari will hold 25.5% of the SPV, which will acquire 100% equity interest in Lumileds International. An additional USD41m will be injected for working capital, bringing the total investment to USD280m. The proposed joint acquisition is expected to be completed by 3Q 2026, and it is not subject to shareholder approval.
- Background of Lumileds International. Founded in November 1999 as a joint venture between Philips Lighting and Agilent Technologies, Lumileds is headquartered in Amsterdam and is a global producer of mid to high-end LED products, catering to the automotive lighting, camera flash, and specialty illumination markets. Its largest operations are based in Singapore (wafer fabrication) and Malaysia (LED/module assembly and testing), with a combined issued share capital of USD713m. According to TrendForce, Lumileds ranked third in the global automotive lighting market in 2022, with a 9% market share. Its current strategic focus is on headlamp LED products, some of which are outsourced to its Chinese operations for better economies of scale. Lumileds reported a net loss of USD67m in FY24 on revenue of USD589m, and a net loss of USD17m for 1QFY25 with USD141m in revenue.
- Our view. The acquisition was valued at a P/B multiple of 1.23x, which is considered fair given the company’s loss-making status and owning the proprietary of the aluminium gallium indium phosphide (AIGalnP) LED technology patents. However, due to the intense competition in China’s automotive market, we believe the turnaround for Lumileds will take time and is unlikely to materialise in the near term.
KEY FORECAST TABLE
| FYE June | 2023A | 2024A | 2025F | 2026F | 2027F | CAGR |
|---|---|---|---|---|---|---|
| (RM m) | ||||||
| Revenue | 1,354.0 | 1,478.7 | 1,384.8 | 1,472.3 | 1,532.8 | 1.2% |
| Gross Profit | 355.0 | 323.7 | 304.7 | 346.0 | 360.2 | 3.6% |
| Pre-tax Profit | 355.8 | 310.1 | 278.8 | 314.3 | 324.0 | 1.5% |
| Core Profit | 323.5 | 310.2 | 259.3 | 292.3 | 301.4 | -1.0% |
| EPS (Sen) | 8.5 | 8.2 | 6.8 | 7.7 | 8.0 | |
| P/E (x) | 24.9 | 26.0 | 31.1 | 27.6 | 26.8 | |
| DPS (Sen) | 8.2 | 7.7 | 6.6 | 7.4 | 7.7 | |
| Dividend Yield | 3.8 | 3.6 | 3.1 | 3.5 | 3.6 |
Source: Company, PublicInvest Research estimates
Sources: Company, Bursa Malaysia
| Party | Equity Portion | Enterprise Value | Estimated Working Capital | Total Investment Outlay | |||
|---|---|---|---|---|---|---|---|
| USDm | RMm | USDm | RMm | USDm | RMm | ||
| Sanan | 74.50% | 178.05 | 765.61 | 30.55 | 131.37 | 208.60 | 896.98 |
| Inari | 25.50% | 60.95 | 262.09 | 10.45 | 44.93 | 71.40 | 307.02 |
| 100.00% | 239.00 | 1,027.70 | 41.00 | 176.30 | 280.00 | 1,204.00 | |
Sources: Company, PublicInvest Research
| 31st Dec 2024 (USDm) | 31st Mar 2025 (USDm) | |
|---|---|---|
| Total Assets | 515 | 515 |
| Total Liabilities | 305 | 322 |
| Total Equity | 210 | 193 |
| Revenue | 589 | 141 |
| Net Loss (total comprehensive loss attributable to owner) | -67 | -17 |
Sources: Company, PublicInvest Research
KEY FINANCIAL DATA
INCOME STATEMENT DATA
| FYE June (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Revenue | 1,354.0 | 1,478.7 | 1,384.8 | 1,472.3 | 1,532.8 |
| Cost of sales | -999.0 | -1,155.0 | -1,080.2 | -1,126.3 | -1,172.6 |
| Gross Profit | 355.0 | 323.7 | 304.7 | 346.0 | 360.2 |
| Other Gains / (Losses) | 77.1 | 81.1 | 79.1 | 79.5 | 79.2 |
| Administrative expenses | -75.8 | -92.6 | -103.9 | -110.4 | -115.0 |
| Finance Costs | -1.8 | -1.9 | -1.2 | -0.8 | -0.4 |
| Share of profit/(loss) of associates | -0.1 | 1.3 | -0.2 | 0.0 | 0.0 |
| Pre-tax Profit | 355.8 | 310.1 | 278.8 | 314.3 | 324.0 |
| Income Tax | -30.8 | -9.9 | -19.5 | -22.0 | -22.7 |
| Effective Tax Rate (%) | 8.6 | 3.2 | 7.0 | 7.0 | 7.0 |
| Minorities | -1.5 | -0.1 | 0.0 | 0.0 | 0.0 |
| Core Profit | 323.5 | 310.2 | 259.3 | 292.3 | 301.4 |
Growth
| -13% | 9% | -6% | 6% | 4% | |
|---|---|---|---|---|---|
| Revenue | -13% | 9% | -6% | 6% | 4% |
| Gross Profit | -24% | -9% | -6% | 14% | 4% |
| Core Profit | -17% | -7% | -14% | 13% | 3% |
Source: Company, PublicInvest Research estimates
BALANCE SHEET DATA
| FYE June (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Property, Plant & Equipment | 509.0 | 779.4 | 800.5 | 811.1 | 811.1 |
| Cash and Cash Equivalents | 1,831.0 | 2,260.7 | 2,271.8 | 2,262.0 | 2,266.4 |
| Receivables, deposits and prepayment | 411.0 | 253.5 | 241.5 | 252.7 | 260.5 |
| Other Assets | 215.7 | 260.4 | 248.7 | 255.9 | 263.2 |
| Total Assets | 2,966.8 | 3,554.1 | 3,562.5 | 3,581.7 | 3,601.1 |
| Payables | 276.1 | 274.7 | 269.6 | 273.8 | 277.8 |
| Borrowings | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Deferred tax | 11.5 | 13.4 | 13.4 | 13.4 | 13.4 |
| Other Liabilities | 73.3 | 91.9 | 91.9 | 91.9 | 91.9 |
| Total Liabilities | 360.9 | 379.9 | 374.9 | 379.1 | 383.1 |
| Shareholders’ Equity | 2,605.8 | 3,174.2 | 3,187.6 | 3,202.6 | 3,218.0 |
| Total Equity and Liabilities | 2,966.8 | 3,554.1 | 3,562.5 | 3,581.7 | 3,601.1 |
Source: Company, PublicInvest Research estimates
PER SHARE DATA & RATIOS
| FYE June | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Book Value Per Share | 0.8 | 0.8 | 0.8 | 0.9 | 0.9 |
| NTA Per Share | 0.8 | 0.8 | 0.8 | 0.8 | 0.9 |
| EPS (Sen) | 8.5 | 8.2 | 6.8 | 7.7 | 8.0 |
| DPS (Sen) | 8.2 | 7.7 | 6.6 | 7.4 | 7.7 |
| Payout Ratio (%) | 95.9 | 94.5 | 96.2 | 96.2 | 96.2 |
| ROA (%) | 10.9 | 8.7 | 7.3 | 8.2 | 8.4 |
| ROE (%) | 12.4 | 9.8 | 8.1 | 9.1 | 9.4 |
Source: Company, PublicInvest Research estimates
RATING CLASSIFICATION
STOCKS
SECTOR
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