Hi-P

[winston]

Small position to follow their story. From Lim & Tan:-

Cash Rich With Reasonable Yield And Prospects S$0.30-HIPL.SI

4Q ‘08 net profit fell 19% yoy and 2% qoq to $25mln while sales fell 13% yoy but rose 8% qoq to $272mln, in line with management’s guidance.

Operating profit fell 30% yoy and 15% qoq to $23.7mln reflecting allowance for inventory obsolescence ($6.1mln), impairment of fixed assets
($9.232mln) and provision for onerous contracts ($3.8mln). If not for these items, operating profit would have been higher yoy as well as qoq.

Cash conversion cycle improved from 58 days last year to 53 days in the current quarter, lengthening by only 1 day qoq, resulting in solid operating cash flow of $43.9mln for the quarter, up from $13.3mln last year and $10.8mln last quarter more than sufficient to cover capex of $15.4mln and repayment of borrowings of $6mln.

Cash holdings rose $22.457mln to $131.566mln versus debts of only $5.679mln, translating to a net cash position of $125.887mln. This represents 47% of its current market cap of $266.15mln, up from 38% in Dec ’08 and 30% in Nov ’08 when it released its 3Q ‘08 results.

However, dividend payment rose 47% yoy (slower than profit growth of 70.5%) to 2.2 cents a share, representing 19% of profits down from 22% last year likely due to the challenging business prospects and management’s preference to retain cash in search for acquisition targets.

Looking ahead, management expects 1Q ‘09 sales to be lower than 1Q ‘08’s $49mln, but due to better cost controls, net profit is expected to be similar at $25mln. This would be similar on a sequential basis as well.

For full year 2009, management expects the profitability outlook to remain challenging (reflecting order slowdown from some customers, financial difficulties faced by customers and suppliers, increased competititon and currency volatility) but they will actively reduce costs, control capex, exercise credit management, fight for new business and expand product range with existing customers to help offset the challenges.

With the stock trading at trailing PE of 2.6x, price to sales of 0.2x, price to book of 0.48x, net cash position accounting for 47% of its market cap, up from 30% when it released its 3Q ‘08 results in Nov ’08, div yield of 7.3% and management expecting to maintain bottom-line on a yoy and qoq basis in 1Q ‘09, we believe the stock merits a BUY (up from our last HOLD call in Dec ’08 and Trading BUY call in Nov ’08).

[winston]

From DBS:-

Sitting on cash pile
Another excellent set of 4Q08 numbers, after impressive 2Q08 and 3Q08 results, should reinforce investor confidence in Hi-P. FY09 outlook while challenging is still better than industry, due to stable wireless segment. With net cash of 15 cents per share, Hi-P is attractive at ex-cash FY09 PER of 2.0x and only 0.5x FY09 book value. The stock also pays DPS of 2.2cts, translating to 7% for FY08.

Maintain Buy.
Impressive earnings and cash flow. 4Q08 net profit of S$25m (-2% qoq, -19% yoy), was much better than our S$13m expectations, mainly due to:-
(i) much better gross margins of 20%, which improved from 17% in 3Q08 helped by lower oil price and unrealized forex gains at Poland plant (ii) revenue of S$272m (+7.5% qoq, -13.2% yoy) was also better than our expectations as Hi-P continues to churn more volume for RIM.

Operating cash flow was very impressive at S$43.8m (+405% qoq, +329% yoy) as inventory and cash receivables showed significant
improvement. The company declared final dividend of 2.2 cents (7% yield), better than our expectations of 2 cents.

Decent FY09 outlook despite challenges. Management has guided for similar profits yoy in 1Q09 despite lower revenue, through better-cost control. While management is optimistic about growing its topline in FY09, we forecast 10% decline mainly due to weakness in the consumer electronics business given lower consumer spending. We have assumed stable wireless business, as it would benefit from addition of a new customer in 3Q08. Assuming 17.5% gross margins versus 18.3% in FY08, we expect FY09 earnings to decline 28%. Our forecasts could prove
conservative if cost control can keep margins stable.

Candidate for bargain hunting. With net cash of 15 cents per share, Hi-P is trading at
(i) 0.5x FY09 book value and
(ii) ex-cash FY09 PER of 2.0x.

Based on its historic P/BV range of 0.48x – 9.18x, we recommend BUY, with revised target price of S$0.55 pegged to 0.8x FY09 BV.

[winston]

Small position to follow story. From Lim & Tan:-

Putting Cash To Good Use S$0.47-HIPL.SI

One of the most aggressive share buy-backs we have seen for a long time, has to be Hi-P, whose buying can account for as much as >80% of total trades of the day, as on March 4th and Mar 17th; and in the process help move the share price from 34 cents to 46.5 cents in a month. (Exhibit 2)

The buy-back is more than justified by the company’s net cash of $126 mln at end ’08; the modest valuation
of the stock, which offsets management’s guidance for “lower revenue but maintained earnings in Q1 ’09 through better cost controls”; and the reasonable yield of 4.7% based on 2008 payout of 2.2 cents per
share (6.5% when the buy-back program began).

Hi-P has thus far bought 16.07 mln shares, representing 18% of the maximum of 88.72 mln shares under the current mandate.

We have a BUY on the stock, and expect it to remain on the up-trend for a while. Technically, we would be wary as the stock gets near the 60-cent support-turned-resistance level.

[winston]

The following should be good for Hi-P:-

Research in Motion continued to climb after reporting earnings that were significantly higher than analyst expectations Thursday after the market closed.

RIMM closed up more than 20% on Friday and is now more overbought below the 200-day moving average than at any point since mid-January.

[winston]

Not vested anymore.

HI-P INTERNATIONAL - Credit Suisse assumed coverage of Hi-P International with an "outperform" rating and a target price of S$0.90 based on the firm's "stronger-than-expected" second quarter results and the stock's undemanding valuations.

[Aspellian]

Not vested anymore.

HI-P INTERNATIONAL - Credit Suisse assumed coverage of Hi-P International with an "outperform" rating and a target price of S$0.90 based on the firm's "stronger-than-expected" second quarter results and the stock's undemanding valuations.

any reason why you no longer vested when fundamentally this stock seems sound (riding on Blackberry's boom)?
is it because there are better opportunities and Hi-P is a low Beta stock?

not vested but will like to learn from you.

[winston]

Ha Ha ... I sold when I realize that the margins at Blackberry, Palm, I-Phone were coming down and they are cutting cost and squeezing out the suppliers...

[Aspellian]

Ha Ha ... I sold when I realize that the margins at Blackberry, Palm, I-Phone were coming down and they are cutting cost and squeezing out the suppliers...

wow... impressive. you really dig 10 feet deeper than other investors by looking up/down the value chain and react first when something fundamentally IS GOING TO deteriorate, not when margins drop or profits down (which is what most investors do) - if they look at financial statements in the first place.....

[winston]

Not vested. From DBS:-

Hi-P’s quarterly results of $10.8mil (-58% yo-y, -32% q-o-q) is worse-than-expected due to a fall in margin to 14% compared to 22% the previous quarter and 17% the previous year. The company also guided 4Q09 to be much lower on a y-o-y basis.

Cashflow generation remained healthy though, as S$5.4mil of free cashflow is added bringing net cash of S$257mil. Our tech analyst is reviewing her numbers and forecast

[Aspellian]

Ha Ha ... I sold when I realize that the margins at Blackberry, Palm, I-Phone were coming down and they are cutting cost and squeezing out the suppliers...

Not vested. From DBS:-

Hi-P’s quarterly results of $10.8mil (-58% yo-y, -32% q-o-q) is worse-than-expected due to a fall in margin to 14% compared to 22% the previous quarter and 17% the previous year. The company also guided 4Q09 to be much lower on a y-o-y basis.

Cashflow generation remained healthy though, as S$5.4mil of free cashflow is added bringing net cash of S$257mil. Our tech analyst is reviewing her numbers and forecast

Congrats! Winston da-ge get out way before the margin squeeze came out in the papers...
this is a valuable skill that i must really pick-up and learn. . . the ability to look into future based on current facts.