Hi-P's Q4 results of $9.4 million profit after tax and minority interests (-73.7 per cent y-o-y) and $442.1 million revenue (+22.8 per cent) are in line with our estimates. Going forward, the group announced an ambitious 2012 capex plan of $180 million to enhance its existing business and to venture into metal casing business. We believe that the increase in revenue contributions from another customer will cover the revenue fall from major customer Research in Motion (RIM). Maintain BUY with an unchanged TP of $1.22.
Hi-P planned to deploy a capex of $180 million in FY2012, which is higher than our initial estimates of $110 million. Within, 30 per cent of the amount will be channelled into developing the new metal casing ($54 million) business while the rest will be used to enhance its existing business. Given a solid net cash balance of $220.3 million ($0.27/share) and healthy operating cash flow of $101.5 million ($0.12/share) as of end FY2011, the group will have little difficulties in funding this ambitious plan.
Management had confirmed that portion of the $65.5 million capex spent in FY2011 was used to purchase Computer Numerical Control (CNC) machines, with the first batch arrived and installed. More shipments are expected to arrive in the next two quarters, getting ready for the new metal casing business commencing in the second half of the year. At an average cost of $100,000 per machine, we now expect the company to possess 700 to 800 CNC machines by then.
The main reason for Hi-P's poorer-than-expected performance is mainly due to its largest customer (over 50 per cent of FY2011 revenue) RIM's lacklustre performance. Moving on, management guided a bullish outlook, expecting another customer to take up RIM's fall in revenue contribution. We continue to believe that this up-and-rising customer will enable the group to achieve a record performance this year.
BUY
BUY
No comments:
Post a Comment