Hi-P International downgraded to Sell by Maybank Kim Eng

Hong Kong money-changer with yuan symbol signHong Kong money-changer with yuan symbol sign

Maybank Kim Eng downgraded Hi-P International to Sell from Hold, advising investors to wait for a better entry point.

“While we are more optimistic of 2020E earnings growth, fundamentals appear priced in,” the brokerage said in a note Thursday.

“We recommend investors to wait for better entry to account for 2020E uncertainties. Aside from pricing pressure, the need for increased/ more complex processes may affect profitability,” Maybank Kim Eng said. “Slower than expected economy or weaker than expected consumer confidence may also affect end-market demand for Hi-P’s products.”

Hi-P International reported Wednesday its third quarter net profit fell 2.7 percent on-year to S$32.87 million as the gross profit margin declined. Revenue for the quarter ended 30 September rose 5.4 percent on-year to S$397.50 million, the contract manufacturer said in a filing to SGX.

Maybank Kim Eng said it was lowering its 2019 earnings per share estimate by 4 percent after Hi-P lowered its full-year revenue guidance to “lower” from “similar” previously.

But the brokerage raised its 2020-21 earnings estimates by 2 percent to 3 percent on expectations of higher volumes from its key wireless customer’s 5G phone in 2020 and increased allocation from customer Keurig.

Maybank Kim Eng raised its target price to S$1.34 from S$1.21 after rolling forward to 2020 estimates.

The shares ended Friday down 2.08 percent at S$1.41.

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