Hi-P

Hi-P / Technology: based on indications from several supply chain vendors, Apple over the past 2 wks, cut back 4Q iPad orders by 25%, the first such cut known to the Street.
Reduced orders from Apple to iPad suppliers could reflect both weakening demand in Europe due to economic conditions there as well as a strategy by Apple to operate with reduced inventory. RBS notes, “It’s back to reality. Now it seems even for Apple, due to the market situation, we need to be conservative.” This means, other tech products could face an even tougher time.
For a vendor such as Hon Hai, the cut could mean a drop to 13m units in 4Q from 17m units in 3Q, according to JPM estimates.

DBSV reiterates view for “more downside ahead" for the tech sector, urges investors to stay out bcs earnings risks and higher than market valuations will prompt further de-rating on the sector.
The house has downgraded Apple component supplier, Hi-P (15-20% of sales from Apple) to Fully Valued. Believes the stock will remain plagued by sluggish RIM sales and now, lowered iPad shipments.

While near term sentiment may be weak for Hi-P, value hunters may want to keep this counter on the watchlist. After the 46% ytd decline, Hi-P valuations now appear more reasonable at 4.9x P/E, 0.8x P/B, and 6.5% yield. At the trough in 2008, Hi-P traded to a low of 0.44x P/B.