Inari and Sanan to jointly acquire 100% of Lumileds for USD239m (RM1.03bn) with the stake of Sanan 74.5% and Inari 25.5%. Inari’s RM307mil share will be fully funded by existing cash.
We view this acquisition positively. The joint acquisition strengthens Inari’s ties with Sanan, enhances its captive business strategy, and broadens its product portfolio into automotive lighting, camera flash, and specialty illumination, thereby creating new revenue streams.
Maintain FY25F and FY26F earnings forecasts unchanged, while FY27F CNP is raised by 1% to reflect a higher contribution from Sanan post-acquisition.
Reiterate BUY call with an unchanged TP of RM2.94, derived from applying a 30x P/E multiple to FY26F EPS of 9.8 sen.
Acquisition details. Inari, together with Sanan Optoelectronics (Inari’s existing customer), has entered into a SPA to jointly acquire 100% equity interest in Lumileds Holding B.V. and its 11 subsidiaries for an enterprise value of USD239m (RM1.03bn). A Hong Kong SPV will be formed (Sanan 74.5%, Inari 25.5%) to undertake the acquisition, bringing the total investment, including working capital, to USD280m (RM1.2bn). Inari’s share amounts to RM307m, which will be funded entirely by its cash-rich balance sheet (RM2.1bn), with no fund-raising required.
Lumileds’ strategic position in the LED market. The target company, Lumileds, is a global leader in mid- to high- end LED products. Headquartered in Amsterdam, the company serves a broad international customer base across key segments, including automotive lighting, camera flash, and specialty illumination.
Synergies expected from the acquisition. We view this acquisition positively. Led by Sanan, the corporate exercise is part of its horizontal expansion strategy to broaden regional presence and diversify its customer base through the integration of Lumileds’ operations and clientele, with Inari invited to jointly participate. For Inari, the partnership deepens its relationship with Sanan, strengthens its captive business strategy, and broadens its product portfolio into automotive lighting, camera flash, and specialty illumination to creating new revenue streams.
Fair acquisition price. We think the acquisition price is fair, reflecting Lumileds’ established market position, diversified customer base, and the operational synergies expected with Sanan and Inari. The acquisition price of USD239m represents a modest premium of approximately 14% to Lumileds’ net assets of USD210m, aligning closely with its book value. This implies an EV/revenue multiple of ~0.4x based on FY24 revenue of USD589m, which is below the typical trading range of 1.0x–2.5x for comparable global LED and semiconductor component players (e.g., Nichia, Osram). The pricing is further supported by an independent valuation of USD287m.
Earnings revision. The acquisition is expected to be completed by March CY26. Although Lumileds is currently loss-making (net loss of USD67m in FY24), management anticipates a turnaround with significant margin improvements through shared resource allocation and synergies with Sanan. We are maintaining our FY26F and FY27F share of profit from associates for now and will revisit our forecasts post-acquisition. However, we have raised FY27F CNP by 1%, to reflect a higher contribution from Sanan, on the back of expanded product offerings and secured volumes via this acquisition.
Valuation. We reiterate our BUY call on Inari with an unchanged TP of RM2.94, derived from applying a 30x P/E multiple to FY26F EPS of 9.8 sen. Our valuation incorporates a 0% ESG adjustment, reflecting its three-star ESG rating.
Risks. Lumileds’ current loss-making position, potential delays in its turnaround, and exposure to global economic conditions, tariffs, and policy changes.
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Currency | Buy Rates (RM) | Sell Rates (RM) |
---|---|---|
USD | 4.212042 | 4.248408 |
EUR | 4.921000 | 4.929487 |
CNY | 0.591903 | 0.592919 |
HKD | 0.540309 | 0.544492 |
SGD | 3.268153 | 3.293573 |