NRA Capital Pte Ltd

Written by: NRA Team

Friday 2 Aug 2013

Hi-P International - 2Q13 results review

Improving earnings outlook

Hi-P International 2Q13 revenue increased by 13.2% yoy to S$285.0m and net profit of $10.9m (S$2.1m loss in 2Q12) mainly due to increased orders from existing customers.

Hi-P International 2Q13 revenue increased by 13.2% yoy to S$285.0m and net profit of $10.9m (S$2.1m loss in 2Q12) mainly due to increased orders from existing customers. Gross profit margins improved by 4% pts to 10% (declined 1.3% pts qoq) due to lesser contribution from high level (higher component content) assembly projects and a positive shift in product mix, partially offset by increased labor costs and overheads. 

Key notes takeaway from results briefing:

  • 1H utilization rate remains low but expect 2H will improve up to 60%
  • 2H Gross profit margins expects will be lower than 2Q, expect high single digit
  • Construction of Nantong plant in progress and expects to start production in early 2014
  • Capex: 1H2013 total amounted of S$19.8m for purchase PPE. For full year, capex is estimated around S$80m
  • The group expects its existing and new projects will contribute to FY2013 performance
  • The group expects higher revenue and profit in FY2013 as compared to FY2012
  • The group has no intention to privatise the company.

Valuation:

We view Hi-P is not undemanding as its currently trading at 29x historical P/E, consensus 14x P/E in FY13 and 13x for FY14. However, given its tight free float with only 16%, we believe the downside is also limited. We prefer Venture with similar P/E valuation but offer better yield and cash flow generation.

 


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