Small position to follow story..
From Lim & Tan:-
Still Reasonable Valuations S$0.585-HIPL.SI
2Q2008 net profit rose 101% yoy and 9% qoq to $27.1mln on the back of 40% yoy and 5% qoq increase in sales to $282mln, bringing 1H2008 net profit up 81% yoy to $51.8mln and 1H2008 sales up 38% yoy to $551.5mln.
The key driver for 2Q2008 was the wireless telecom division which saw sales rise 94% yoy and 14% qoq to $186.5mln (66% of sales) which was offset partially by 10% yoy and 11% qoq decline in the consumer elec and computing division to $95mln (34% of sales). Key customers in the wireless division are Research In Motion, Nokia and Motorola.
Gross margin in 2Q2008 was 18%, unchanged from1Q2008 but up from 14% a year ago, due to better product mix and economies of scale.
Forex loss narrowed 56% yoy and 92% qoq to $596,000.
Provision for inventory obsolescence and inventory provision was $3.18mln, up from $1.08mln a year ago and $2.45mln a quarter ago.
Impairment of fixed assets and writeoff was $2.9mln, up from zero last year and $2.5mln a quarter ago.
Due to solid working capital management, cash conversion cycle shortened to 43 days versus 45
days in 1Q2008 and 51 days last year. This resulted in operating cash flow improving 133% yoy to
$27.3mln, more than sufficient to cover capex of $3.5mln. Financial position is robust with cash of
$134.2mln versus debts of $41mln, giving a net cash position of $93.2mln. This represents about 18% of its current market cap of $519mln.
Looking ahead, management expects 3Q2008 sales to be lower than 3Q2007, but profit to be higher. Management also expects 2H2008 sales to be similar to 1H2008, but profit to be lower.
We are maintaining our full year forecast at $85mln, implying 2H2008 net profit of $33.3mln which is up slightly from last year’s $31.5mln, but down from 1H2008’s $51.75mln.
At 6x forward PE (against 42% growth), 0.5x sales and 1x book (versus ROE of 17%), valuations remain undemanding hence we maintain BUY.