Hi-P

Hi-P: Announced poor set of results which were however above grp’s estimates for an initial loss in 1Q12. Rev at $273.4m, +14.4% yoy and -35.2% qoq and net profit at $1.5m, -91.5% yoy and -84% qoq. Gross margins fell drastically at 7.1% vs 16.3% yoy. 1Q12 rev was led by more high level assembly projects, however gross margins were weighed due to higher material costs resulting from change in product mix, increased labour costs and overheads. Grp note that the increase in labour costs and overheads is partly due to preparation for a stronger 2H12, with initiatives in: 1) Development of new business opportunities for wireless, computing & peripherals, home appliances, sports digital devices and personal grooming devices 2) Lowering of operating costs via automation and effective control 3) Innovative development of new processes and technologies to align with market trends and demands Overall, grp has guidance for as follows: 1) Expects similar rev but higher profit in 2Q12 as compared to 1Q12. 2) Expects higher rev but lower profit in 2Q12 as compared to 2Q11. 3) Expects higher rev and profit in 2H12 as compared to 1H12. 4) Expects higher rev and profit in FY12 as compared to FY11. We note that overall fundamentals of grp remain strong, with a net cash position of $196.7m and trades at an estimated 11.3x FY12E P/E. Ratings as Follow: DBSV maintains Hold with $0.95 TP