Inari Amertron Berhad (0166)

Name of Student: Toh Cindy Matric Number : MBS141093

Company Background• Established in June 2006 with the

name of Inari Technology Sdn Bhd • Focused on back-end

semiconductor packaging• Included comprises back-end

wafer processing, package assembly and RF final testing for electronic and semiconductor industry

• accredited with ISO 9001:2000 • products of the Inari were mainly

provided to the market electronic product such as mobile smartphone

Company Background2006

• Established in June 2006 with the name of Inari Technology Sdn Bhd

• Focused on back-end semiconductor packaging• accredited with ISO 9001:2000

2007

• Successfully obtained in Pioneer Status for wireless technology from MITI (Ministry of International Trade and Industry)

• second factory was set up to improve the fine-pitch SMT assembly services

2008• Focus set up R&D and enhance technology for the company• New third factory was launched to conduct fine-pitch SMT

assembly and processing services

Company Background2010

• Inari was awarded another ISO 1485 certification for medical sensor products

• warded “Excellent Manufacturing and Outsourcing support on Semiconductor Division Products 2009 Award

2011• listed on the Bursa Malaysia in ACE market

2012

• Inari was obtained another Pioneer State for integrated front end modules devices from MITI

• Inari was developing of fibre optics by in cooperated with Inari South Keytech

2013• Completed the acquisition of Amentron Inc (Global) Limited rename to Inari

Amertron Berhad • Transferred to the Main Market in Bursa Malaysia

Company Background• Today, Inari Amertron Group was become

multinational corporation (MNC) with 9 facilities across 3 countries in Malaysia, China and the Philippines, and 5000 employees were working with Inari.

Industry and Competitive Position

Industry and Competitive Position • Threat of substitutes

o medium o product provide by the company are also provide

by the other competitor o Well in its research and developmento Successfully obtained in Pioneer Status several

times such as wireless technology from 2007-20155

o Start to manufacture its own fibre optical cables to enhance the market share

o Pricing advantage due to economic of scale• Power of Buyer

o lowo Inari was back-end semiconductor packaging

and mostly supplier semi-conductor to manufacture company

o high demand of the electronic product and those product such as mobile smartphone become necessary product in the market

o most of the electrical product need semi- conductor to assemble to become final product

Industry and Competitive Position • Supplier power

o less o The business of the Inari was focusing on back-

end semiconductor packaging, the product that provides by Inari are normally partially finished goods

o Other manufactures especially electrical product manufactures are required Inari component to assembly in to their product in order to become finished goods.

• Threat of new entryo Low o Strong barrier to entry o Patent of technology hold by existing playero High fixed costs need to be covered o High start up cost and difficult to achieved

economic of scale

Industry and Competitive Position • Rivalry

o Higho larger number of firm that similar

to the Inari either local or international

o the high fixed cost of the company forces them to product larger production to attain the lowest unit cost due to economics of scale effect

o high exit barrier for semi- conductor industry as company was difficult to abandoning the plant and equipment that already purchase

o Sometimes there was less profit for the company the business still have to maintain running

Financial Ratio – Liquidity ratio

• The ability of company to cover its short term obligation is good (Current ratio >1)

• Liquidity of Inari was able to cover its short term obligation after exclude inventory.

• Cash conversion cycle showed company liquidity was well as the result only about 86 days to tied up in its production, sales processes of its operations, and get payment from its debtor as well

• The Inari cash ratio figure was moderate and reasonable as it showed that company was utilizing its cash fully rather keep it in the bank

Financial Ratio – Liquidity ratio

• Inari’s DIO showed that company need about 71 days to turnover it inventory.

• For DSO, company needs about 48 days to collect its debt from its debtor.

• About 32 days allow Inari to lengthen its obligation to creditor.

• From the result, Inari ability convert its inventories to sales was longer, and collect the payment from debtor was longer as well.

• Thus, Inari no well manage in its cash cycleIn theory, company should shorten its DIO and DSO but lengthen the DPO to maintain its cash.

Financial Ratio – Activity Ratio

• Inari was having ability to covert is inventory to cost of goods sold (Inventory Turnover = 4.609

• Company was used one dollar of fixed asset to generate RM 5.46 return to its company. Inari was fully utilized to it fixed asset by producing company product.

• Inari’s total asset turnover ratio was about 1.569 which showed that company was used RM 1.00 of its total asset to generate RM 1.57 returned to its company.

• That company was well utilized its non-current asset to produce its product but did not utilized well in current asset to generated sales.

Financial Ratio – Profitability ratio

• Inari was difficult to reduce its price of product as only 20 % of sales were left after deduct COGS

• Most of the company sales revenue was paid to the cost of goods sold, about 80 % of the sales revenue was paid to it. Yet, there was less operating and other expenses for the company.

• Inari was using one dollar of its asset to generate RM 0.20 of earning, about 20% of earning was generating by company asset. (ROA)

• About 39 % returns was earned and could be provided to the investor• In term of efficient management to generate the return, Inari was

showed well manage for its management and able to generate return based on its asset and equity.

Financial Ratio – Debt ratio

• Inari was less depend on financing leverage. Most of the asset was funding from its equity (debt to asset = 0.4799)

• company were less and financing from long- term debt• Inari debt to equity ratio portion was 0.923: 1. This indicate

company had the ability to pay off its debt and strong in it equity position.

• Inari able to cover its interest expenses

Financial Ratio – Market Ratio

• Inari’s investor was getting RM 0.21 return from its RM 1.00 investment

• The P/E ratio of Inari was 14.45 which was about 14 times of stock trading per each dollar of EPS.

• The company 2014 dividend showed about 0.068 per share.

Understanding cash flow statement

• How much cash did the firm generated from its operations? o company generated about RM 40,550,000.00 cash from its operating

activities in 2014

Understanding cash flow statement

• How much did the firm invest in plant and equipment?o Inari was investing about RM 41,146,000.00 to its property, plant and

equipment in 2014.

Understanding cash flow statement

• Did the firm raise additional funds, and if so, how much and from what source ?o Inari was proceeding issues its RPS (Redeemable preference share) and

common share to raise its funds. Other than that, Inari reduced its financing and borrowing from most of the finance sources provider.

Understanding cash flow statement

• is the firm able to generate positive cash flow? o Inari Amentron berhad able to show positive cash flow which was RM

75,070,000.00. Compare to 2013, the cash flow of the Inari was showed increased trend from RM 42,933,000.00 (2013) to RM 75,070,000.00 (2014) about 75 % increased

Projection of future performance – Key assumptions

• Growth and Dividend Assumptions o Expectation sales at 20 % increase from 2014 (RM 793,655,000.00),

maintained same dividend with previous year• Reason

o Smart mobile device such as smart phone, table, and cloud computing and data system was expected booming in information technology industry.

o Inari was having acquisition activities with other company factory, and expected purchase a new factory in the end of 2014 and also early of 2015.

o The purchase and acquisition showed that company was trying to reach market demand and thus increase sales revenue.

o Inari new coming product in 2014: fibre- optic components o Inari was partnership with Avago Technologies Ltd o company was drawdown its debt start from 2014

Summary of assumption

Summary of assumption

Inari Amentron Berhad 3 year Projection Results

Inari Amentron Berhad 3 year Projection Results- Income

Statement

Inari Amentron Berhad 3 year Projection Results- Balance Sheet

Recommendation & Conclusion

• Inari production line and manufacture do not meet to the market demand, company may lose its competitive in the market.

• The company sales were growing further Inari need to seek for outsourcing the production to other company in order to meet market demand

• There was several manufactures plant in process Inari should use its fund speed up the new plant operation and shorten the date of opening in order to improve number of production line.

Recommendation & Conclusion

• Inari need to frequent update its existing products and technology to its client and keep on launching the new product and technology which match with the market needs. o Inari result was goods however

technology sector was normally considered as cyclical business. The performance of the technology easy to fluctuate and could be down to the deep