Hi-P

Hi-P CS maintains Neutral with $1.00 TP. Note that Hi-P’s FY11 results were below both consensus and estimates, with rev up 26% to $1.2 bn but earnings down 33% to S$45.0m. Gross margins in 4Q declined to 8.1% (from 8.7% in 3Q11 and 23.9% in 4Q10), given pricing pressure, weaker product mix (more high-level assembly work with higher material input costs), and increase in labour and depreciation charges.

Mgt has guided for flat revenue YoY and a net loss in 1Q12, but these to be up HoH and YoY in 2H12/FY12. House believe Hi-P’s S$180m capex initiative, against a $45m annual run-rate, reflects management’s confidence in gaining further traction with its key tablets customer. Overall, raise forecasts by 8–24% on more optimistic volume growth assumptions and peg our TP at 12x P/E, or $1.00. But with the stock up 20%+ WoW, would look for a better entry point.