Hi-P shares tumble after earnings guidance lowered

Knife display at Daiso in SingaporeKnife display at Daiso in Singapore

Hi-P International saw its shares tumble on Thursday, despite DBS saying the contract manufacturer’s first-quarter earnings were broadly in line with expectations.

But the company issued a cautious outlook, noting that the International Data Corporation (IDC) Worldwide Quarterly Mobile Phone Tracker showed global smartphone shipments declined 0.5 percent last year, the first year-on-year decline ever since the introduction of smartphones. But it noted that IDC expects shipment volumes to show low single-digit growth this year.

Hi-P lowered its guidance, saying it expected similar revenue but lower profit for 2018, compared with 2017; it had previously said it expected both higher revenue and higher profit for 2018.

Lim & Tan Securities said in a note on Thursday that it was surprised by the guidance cut.

“Its major customer Apple had recently released a set of sterling results,” Lim & Tan noted. “Hi-P should therefore benefit accordingly from the better fortunes of its customer.” It has a Sell on the share as it expected it would disappoint analysts’ expectations.

The stock was down 10.06 percent at S$1.52 by 3:44 P.M. SGT, a bit off its intraday low of S$1.45; buy orders were clustered at S$1.51 and sell orders were at S$1.52, according to DZHI data.

The maker of smartphones and other consumer electronics devices reported its first-quarter net profit rose 19.9 percent on-year to S$10.1 million on revenue of S$281.096 million, up 15.1 percent on-year.

The weakening of the U.S. dollar against China’s yuan and the Singapore dollar caused a S$13.0 million net foreign exchange loss, partially offset by a net fair value gain of S$1.7 million on hedging instruments, the consumer electronics and smartphone manufacturer said in a filing to SGX after the market close on Wednesday. The company said that was the reason for its 212 percent on-year increase in other expenses to S$11.3 million.

Several of its manufacturing peers, including Venture, have also recently pointed to currency effects dampening their earnings.

DBS said in a note on Thursday that the results were broadly in line with its expectations, accounting for around 20 percent of its full-year revenue forecast and 9 percent of its full-year net profit estimate; traditionally, the first quarter is a lull period, DBS said, noting it was “a decent set of results,” despite the foreign-exchange loss.

DBS pointed to Hi-P lowering its earnings guidance and cut its earnings forecasts for 2018 and 2019 by 5 percent each and lowered its target price to S$1.80 from S$1.88. It kept a Hold call.

 

Hi-P had pointed to the threat of a trade war between the U.S. and China as the reason for lowering its guidance; six of its 13 manufacturing facilities are in China.

The market may be especially jittery as a U.S. trade delegation was in Beijing on Thursday to hold talks with China over trade issues, with both sides posturing over their unwillingness to be the first to blink.

This article was originally published at 3:29 P.M. SGT on Thursday, May 3, 2018; it has since been updated.