Hi-P International - CGS-CIMB Research 2020-10-02: Aiming For M&A Driven Growth

HI-P INTERNATIONAL LIMITED (SGX:H17) | SGinvestors.io HI-P INTERNATIONAL LIMITED (SGX:H17)

Hi-P International - Aiming For M&A Driven Growth

  • We had a discussion with Hi-P International last week regarding updates on its business.
  • We understand that orders from key customers remain healthy and Hi-P International remains interested in growth via M&As.
  • Reiterate HOLD, with an unchanged target price of S$1.23.



Hi-P International's orders are healthy

  • We had a call with Hi-P International (SGX:H17) last week for an update. Based on our understanding, orders from most of Hi-P’s key customers are healthy. We believe Hi-P is seeing domestic market demand in China, with orders for smart wearables and Internet of Things (IoT) devices from a Chinese customer.
  • The other trend we noted is that some customers are enjoying stronger demand for their products due to the shift to work-from-home arrangements. We believe Hi-P International is also experiencing stronger orders from a communications customer, which has benefitted from America’s trade war with China.


Looking to grow via M&As

  • We believe Hi-P International remains committed to its M&A growth strategy, supported by a net cash balance of S$197m as at end-Jun 2020 and 80.2m treasury shares.
  • To recap, Hi-P International acquired South East Asia Moulding Company Pte Ltd, a high-volume/high-precision engineering plastic components manufacturer, last year. We believe Hi-P International remains interested in acquisitions that will help the company penetrate the automotive/healthcare industries.
  • Also, given the US-China trade war, potential M&As could be a way to establish a manufacturing presence in Vietnam, Malaysia or the Philippines. As COVID-19 has restricted the ability of management to travel for due diligence, we believe any M&As will have to wait until travel between countries normalise.


Ceasing quarterly reporting

  • Hi-P International has ceased quarterly reporting, in line with the revised listing requirements, and, hence, did not provide any update for its 1Q20 performance. In the event that Hi-P International does not provide a 3Q20 update, investors will have to wait till Feb 2021 for its FY20 full-year results announcement to be apprised of the company’s financial performance.

Reiterate HOLD on Hi-P International






William TNG CFA CGS-CIMB Research | Darren ONG CGS-CIMB Research | https://www.cgs-cimb.com 2020-10-02
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.230 SAME 1.230



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