by winston » Fri Oct 01, 2010 12:17 pm
Not vested. From Lim & Tan on Sep 17:-
Hi-P’s major customer Research In Motion (RIM) reported 2Q ended Aug ’10 sales increase of 31% to $4.62bln, way ahead of expectations of $4.49bln and profits blew past expectations of $1.36 per share coming in at $1,46, while shipments rose a record
45% to 12.1mln units.
And management guided another record beating quarter ahead with sales expected to range between $5.3-5.55bln, way ahead of expectations of $4.82bln and profit of $1.62-1.70, way ahead of expectations of $1.39.
As a result, the stock surged 10% in after hours trading.
The above likely explains the strong turnaround that Hi-P has guided the market for 2H ‘10, where the company is expected to report a strong profit of $55-56 mln against 1H ‘10’s loss of $1.8mln.
However, we note that since Hi-P’s initial positive revision guidance to the market of their turnaround in mid-June ’10 when the stock was trading close to the 50 cents level, in a span of 3 months, the stock price has risen a robust 80% to 90 cents currently
(hitting its 52 week high of 92 cents on 9 Sept ’10), partly on the back of its strong turnaround as well as its aggressive share buy backs.
Its last share buy back was done on 7 Sept ’10 where the company bought 468,000 shares at 86 cents each increasing its cumulative buy backs to 29.087mln shares, representing 33.5% of its max allowable buy back amount of 86.827mln shares. The highest price paid was at 86.5 cents on 13 Aug ’10.
With a net cash position of $196.497mln, it represents 24.6% of its current market cap of
$798.46mln against 44% when the stock was close to the 50 cents level in Mid-June ’10.
At 90 cents, the stock price is coming close to its mid-2007 high of $1 and puts its 2010 PE of 14-15x at a premium to bigger peers such as Venture and Hon Hai’s 13-14x.
Regretably, we “only†upgraded the stock to “Neutral†in mid-June ’10, having missed out on its significant run over the last 3 months.
While the stock may remain strong on the back of its continued share buy back program, positive newsflow from its major customer as well as its own robust 2H ‘10 performance, we note that its current valuations is not compelling compared to its bigger peers and it is also coming close to its 2007 peak level, we maintain Neutral.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"