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Wed, 09/09/2020 – 13:04
CGS-CIMB has commenced coverage of contract manufacturer Hi-P International with a “hold” recommendation and a target price of S $ 1.23.
The counter was trading at S $ 1.17, down S $ 0.01 or 0.9% before the midday break on Wednesday, amid wide market declines in the Singapore stock exchange.
“Given its net cash balance (of S $ 197 million) at the end of June 2020, mergers and acquisitions may provide Hi-P with growth opportunities,” wrote CGS-CIMB analysts William Tng and Darren Ong in a research note on Tuesday.
In October last year, Hi-P announced that it was acquiring the high-precision plastics manufacturer, South East Asia Molding Company, which has production facilities in Singapore.
“The acquisition brought new capabilities and a new customer for Hi-P, in our opinion,” the analysts said.
Hi-P’s management has guided that a major client, a computing and wireless device company, accounted for just under 50 percent of its 2019 tax revenue. Three other companies involved in personal care and lifestyle products they each accounted for 7 to 8 percent of their revenue for fiscal year 2019.
Given its net cash balance, Hi-P is exploring inorganic growth opportunities to reduce its risk of customer concentration and expand the company, CGS-CIMB said.
The brokerage obtained a price target of S $ 1.23, based on its estimate of 1.52 times the book price for fiscal year 2020.
“Given a potential total return of 1.6 percent relative to our price target, our recommendation is ‘hold,'” said CGS-CIMB.
Hi-P is a global contract manufacturer of smartphones, tablets, consumer electronics and medical devices, among other things. As of the end of July, the tech game has 13 manufacturing plants in Singapore, Thailand, Poland, and five locations in China.
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