SINGAPORE (Feb 19): Hi-P on Feb 13 reported that its 4Q17 earnings more than doubled to $59.6 million y-o-y, which brought FY17 earnings to $121.5 million, 122.8% higher y-o-y.
Revenue jumped 37.8% y-o-y to $491.9 million, due to higher sales volume resulting from the mass production of certain projects in the quarter, which brought gross profit to $97.2 million, 52.4% higher y-o-y.
The group also declared a final cash dividend of 4.0 cents per share.
See: Hi-P 4Q earnings more than double to $59.6 mil
Hence, Maybank is reiterating its “buy” recommendation on Hi-P with a target price of $2.43.
This is the research house’s second coverage on the group, following its initiation on Dec 2017.
See: Hi-P started at 'buy' on strong turnaround
The group’s earnings came in above the research house’s full-year estimate, due to a positive margin surprise.
In a Thursday report, analyst Lai Gene Lih says, “FY18E EPS growth of 17% y-o-y should be driven by further ramp up for Amazon Echo and new models from a key wireless customer. Our thesis that Hi-P is entering a phase of strong growth and stable returns is intact.”
The group’s revenue for the period increased significantly, driven by ramp-up of new business and allocation gains. Volumes for Amazon Echo exceeded Hi-P’s internal estimates.
For the key wireless customer, strong volumes for 2017 flagship models offset weaker performance for the ultra-flagship model.
The group intends to participate in all model launches of this customer this year.
“Hi-P has also been a beneficiary from Amazon’s strategic ambitions for Alexa, in our view,” says Lai.
The analyst predicts that the group will be able to maintain an 8.5% net margin in FY18, as positive effects from improved volumes and yield cancel out headwinds in pricing pressure and currency moves.
Separately, Hi-P also announced that its chief operating officer, Yong Inn Nam, has tendered his resignation. This came shortly after Yong was promoted in Nov 2017.
“We are concerned by this as we are not privy to the inner workings within the ranks of senior management, and the impact, if any, on its long-term direction,” says Lai.
However, the analyst does not see this as a huge risk to the forecasts, as the group’s strong teamwork and execution functions have been its key driver to its performance.
As at 12.25pm, shares in Hi-P are trading 17 cents or 8.5% higher at $2.17.
The stock is also trading 2.5 times FY18 book with a dividend yield of 3.1%.
