Hi-P International - CGS-CIMB Research 2020-12-18: Major Shareholder Seeks Privatisation


Hi-P International - Major Shareholder Seeks Privatisation

  • Hi-P International has received a privatisation offer at S$2.00 per share in cash from its founding shareholder. If successful, Hi-P International will be delisted from SGX.
  • Given limited trading liquidity, we recommend investors accept the offer which is reasonable, in our view.
  • To reflect Hi-P International’s improved business prospects, our target price is raised to S$2.00. Maintain HOLD.

Receives privatisation offer

  • Hi-P International (SGX:H17) has received a privatisation offer from its major shareholder, Mr Yao Hsiao Tung, who currently owns 83.41% of the company’s shares. The offer price is S$2.00 per share in cash and will not be revised unless a competitive bid surfaces.
  • The offer, once successful, will lead to the delisting of Hi-P International.
  • On a historical P/BV basis, Hi-P International’s offer is attractive at 2.60x P/BV versus Sunningdale Tech’s 0.78x (offer currently in progress) and Memtech’s 1.09x P/BV (offer completed). In the past 5 years, Hi-P International’s +1 s.d. above mean P/BV was 2.10x and + 1 s.d. above mean P/E was 14.5x. Against this benchmark, the offer’s P/BV of 2.6x and P/E of 20.0x is at a premium.

Major customer upped its shipment targets recently

  • According to a 15 Dec 2020 report by Nikkei Asia Review, Apple (AAPL US) reportedly wants to increase iPhone production by roughly 30% y-o-y in 1H21F due to strong demand for the company's first 5G phones. Nikkei Asia Review reported that Apple could produce up to 96m iPhones for 1H21. We believe Hi-P International could be a beneficiary of this development as our channel checks indicate that Apple is a major customer of Hi-P International.
  • We also understand that Hi-P International is diligently seeking to further penetrate its customer D’s supply chain (Hi-P International acquired this customer via an acquisition in Oct 2019).

Take the offer

William TNG CFA CGS-CIMB Research | Darren ONG CGS-CIMB Research | https://www.cgs-cimb.com 2020-12-18
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.00 UP 1.230