Hi-P

Hi-P: Shares hit 6-month high on iPhone talk. Analysts up 2012 earnings estimate 28% and price target 54% after firm's $100m capex in guidance

DMG note that the Co. could be a key supplier for the next-generation iPhone. Add that channel checks show that the gup has already secured a large order for its new metal-casing business, which house believe to be Apple. Reiterating their 'buy' call, house raised the earnings estimate for FY12 27.9% to $86.3m, and their TP by 54% to $1.22.

DMG drew attention to Hi-P's surprising 'massive $100m capex expansion' in its 2Q guidance to increase production capabilities to keep up with an increasing use of metal in smart-phones, tablets and other consumer electronic devices. Given Hi-P's record of low capex spending and the mgt's conservative nature in running the business, house doubt that Hi-P would proceed without securing any orders.

Hi-P is known to be a supplier for Apple; it has a track record of supplying electro-mechanical parts and carries out assembly work for the Apple iPad 2 tablet. But metal casing offers better margins. Leading metal casing maker Catcher Technology Co of Taiwan has gross profit margins of about 25% compared with Hi-P's 19%. Metal casing makers are also trading at higher valuations, with share prices trading at an average of 13.6x FY12 estimates, DMG said. Hi-P is only trading at about 8x Fy12 estimates.