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Hot stock: Hi-P pares losses from morning trade; down 10% on day

CONSUMER electronics manufacturer Hi-P International's stock pared its losses from earlier in the day, but was still down 10.24 per cent heading into the final hours of trading on Thursday.

The counter regained some lost ground to trade at S$1.14 as at 3.45pm, up from S$1.09 heading into the midday trading break on Thursday, leading declines among the tech stocks on the Straits Times Index.

The fall comes a day after it announced earnings for its second fiscal quarter.

Hi-P is the latest tech stock to fall after AEM Holdings. The contract manufacturer clocked a 19 per cent drop in net profit to S$12.29 million for the second quarter ended June 30 as the cost of sales escalated, despite an 8 per cent higher revenue to S$302 million on increased sales volume.

The company did not declare a dividend for the quarter. In the corresponding year-ago period, it declared an interim dividend of 19 Singapore cents per share.

Its stock has been steadily falling from its peak of S$2.72 on March 15 this year, amid a surge in optimism among tech stocks then, led by homegrown concern Creative.

The stock is back to a level seen exactly a year ago on Aug 2, 2017, having erased all the gains it has seen this year.

Given the outlook for the smartphone, Internet of Things and consumer electronics markets as well as ongoing challenges in the industry, Hi-P said that it would focus on developing new customers and products through targeted business development initiatives, boost allocation from its existing customers, explore inorganic growth opportunities in the automotive and medical industries as well as work to manage costs.

The group also said that it expects higher revenue but similar profit for Q3 2018 as compared to Q3 2017, and similar revenue but lower profit for FY2018 as compared to FY2017.

DBS Group Research wrote in a May research note that it expects lower overall profit for fiscal 2018, due to Hi-P's exposure to the Chinese market now embroiled in a trade war.

The more cautious outlook - especially for smartphones - also drove Hi-P to lower its outlook guidance.

Fellow tech listee AEM Holdings, meanwhile, has arrested the 40 per cent slide in its stock price, which began on Tuesday after it warned of "significant volatility" ahead despite a second-quarter net profit of S$9.5 million, up 15.6 per cent year-on-year.

AEM was down 0.67 per cent to 74.5 Singapore cents on Thursday.

For local tech stocks, valuations have run ahead of fundamentals, which is why most tech stocks have been correcting in the past few days, said RHB analyst Jarick Seet, adding that the outlook for the local tech sector appears to be weaker for the next one to two years.