Hi-P did well in 2Q’13 and performed in line with expectations with sales up 13% to $285mln on the back of strong demand from Blackberry and Apple while gross profit surged 88% to $28.4mln due to a better product mix and lower contributions from lower margined assembly work. Economies of scale also helped.
Positive operating leverage and the strong US$ helped bottom-line turnaround to $11mln, up from a loss of $2mln a year ago and helped 1H13 bottom-line turnaround to a profit of $18mln from loss of $583,000 last year.
Good working capital management also saw operating cash flow turnaround to positive $24mln for 2Q’13 and positive $99mln for 1H13 from negative $31mln and negative $34mln respectively last year.
Net cash of $60mln represents 9% of its current market cap of $679mln.
Looking ahead, management remains optimistic of prospects and expects to do better in 2H13 yoy and hoh on the back of maiden contributions from Apple’s new low cost iPhone, Google’s maiden launch of their new smart-phone Moto X as well as new product launches from Blackberry. Other customers contributing to growth include Amazon’s Kindle Fire tablet, Nike’s lifestyle tech gadgets, P&G’s consumer electronic products and Colgate’s electric toothbrushes.
While we remain optimistic on the company’s outlook, we also note that technically it looks to be re-testing May’13 level of 85.5 cents and we believe that this level will likely post technical short-term resistance unless management restarts their share buy back program which had in the past proven to be powerful.
Unless the 85.5 cents level can be surpassed it would likely have to consolidate a while before attempting to break above this level.
Fundamentally, we still like the stock based on its bright prospects and have a medium term BUY.
Publish date: 02/08/13