Maybank KimEng upgraded contract manufacturer Hi-P International to Hold from Sell, saying the negatives are priced in after the stock’s 22 percent drop since late April.
But it was concerned about earnings risk amid a cloudy outlook.
“The escalation of the U.S.-China trade war has reduced our conviction that Hi-P can achieve guidance of flat FY19E earnings, for
which we expect the second half to account for 70-80 percent of the full year,” Maybank KimEng said in a note Monday.
“As such, we await a lower entry point and better clarity on earnings before considering a more positive stance on the shares,” it added.
The fourth quarter earnings outlook faces uncertainty as it hinges on the popularity of a wireless customer’s smartphones, to be launched later this year, the note said.
It also pointed to a potential scenario of a sharp earnings drop if China demand for its customer’s phones drops due to a potential boycott related to the U.S.-China trade war.
Other risks included a deterioration in global consumer sentiment as Hi-P’s products are mainly discretionary consumer electronics as well as intensifying pricing and cost pressures, the note said.
Maybank KimEng kept its target price on the stock at S$1.22.
The stock was down 0.75 percent at S$1.33 at 9:40 A.M. SGT Thursday. That was after touching levels as high as S$1.72 in April.
While you’re here, we’re hoping you can help us out.
Shenton Wire has been providing you with quick news and market analysis. But we need your support to continue to bring you the news you’ve come to expect and to expand our reach beyond Singapore.
Your monthly contribution will directly fund our journalism.
You can check your existing account here. You can also contact us about other contribution levels or for corporate subscriptions and syndication queries.