DBS Vickers upgraded electronics firm Hi-P International, to buy from hold and raised its target price to
$0.91 from $0.86, citing an expected rebound in earnings in the second half of the year.
By 12:03 p.m., Hi-P, which supplies components to Apple Inc, was up 6.8% at $0.785. Its shares have jumped nearly 30% since the start of the year, outperforming FT ST Industrial Index’s 12.9% rise.
Hi-P posted a loss of $2.1 million in the second quarter, but management guided for higher sales and net profits in 2012, implying that net profit in the second half should be more than $45 million, DBS said.
“We believe such optimistic guidance is driven by new tablets and smartphones for customers such as Apple, RIM and Amazon in addition to sports devices for Nike,” said DBS.
The brokerage added that component suppliers are expected to ramp up production in July or August for the release of the new iPhone in October and Amazon’s new e-book in the second half.
Hi-P’s current valuations are cheaper than the average of its peers, and its shares have historically rallied ahead of new iPad launches, DBS said.
“Given that the company is growing bigger in its engagement in next generation smartphones, we urge investors to position in the stock ahead of the new launch,” it said.
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