Brokers' take

Hi-P International | Buy Dec 21 close: S$1.84 Target price: S$2.11 Maybank Kim Eng, Dec 20

We see Hi-P entering a phase of record revenues and improved earnings quality. FY18E-19E EPS CAGR of 19 per cent is driven by its key wireless customer, as well as the ramp-up of business with IOT customers and P&G. Returns on equity profile should also markedly improve now that Hi-P has selectively moved way from unprofitable assembly projects to focus on stable ones from blue-chip customers, such as Apple, Keurig, and Colgate. Our TP is based on FY17E P/B of 3.4 times.

We forecast revenue CAGR of 15 per cent in FY17E-19E. Of this, about 4ppt of growth is driven by momentum of allocation wins from its key wireless customer. In the IOT segment, which is expected to deliver about 8-9ppt of revenue growth, Hi-P is ramping up components for Customer A's smart speakers (US$570 billion market cap e-commerce giant), and smart-locks assembly for Customer O (dominant Chinese bike-sharing platform). In the consumer electronics segment (CE, about 35 per cent of revenue), FY18E growth is driven by P&G's outsourcing trends, and bright prospects from Keurig.