Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

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Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.</strong>&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<h2>Hi-P International Limited</h2>
<h3>Aiming for M&amp;A-driven growth</h3>
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<li>We had a discussion with Hi-P last week regarding updates on its business.</li>
<li>We understand that orders from key customers remain healthy and Hi-P remains interested in growth via M&amp;As.</li>
<li>Reiterate Hold, with an unchanged target price of S$1.23.</li>
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<p><strong>Orders are healthy<br></strong>We had a call with Hi-P International 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 is also experiencing stronger orders from a communications customer, which has benefitted from America’s trade war with China.</p>
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<p><strong>Looking to grow via M&amp;As<br></strong>We believe Hi-P remains committed to its M&amp;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 acquired South East Asia Moulding Company Pte Ltd, a high-volume/high-precision engineering plastic components manufacturer, last year. We believe Hi-P remains interested in acquisitions that will help the company penetrate the automotive/healthcare industries. Also, given the US-China trade war, potential M&amp;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&amp;As will have to wait until travel between countries normalise.</p>
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<p><strong>Ceasing quarterly reporting<br></strong>Hi-P 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 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.</p>
<p><strong>Reiterate Hold<br></strong>We reiterate our Hold call on Hi-P with an unchanged target price of S$1.23. Our target price is based on a 1.52x FY20F P/BV multiple, derived from the Gordon Growth Model (COE: 8.7%; ROE: 12.7%). We use a Gordon Growth Model-derived P/BV to value the company given the cyclicality of the business. A downside risk is a deterioration in customer demand. An upside risk is higher orders from its major customer.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.
Hi-P International Limited
Aiming for M&amp;A-driven growth





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






Orders are healthy We had a call with Hi-P International 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 is also experiencing stronger orders from a communications customer, which has benefitted from America’s trade war with China.


Looking to grow via M&amp;As We believe Hi-P remains committed to its M&amp;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 acquired South East Asia Moulding Company Pte Ltd, a high-volume/high-precision engineering plastic components manufacturer, last year. We believe Hi-P remains interested in acquisitions that will help the company penetrate the automotive/healthcare industries. Also, given the US-China trade war, potential M&amp;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&amp;As will have to wait until travel between countries normalise.




Ceasing quarterly reporting Hi-P 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 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 We reiterate our Hold call on Hi-P with an unchanged target price of S$1.23. Our target price is based on a 1.52x FY20F P/BV multiple, derived from the Gordon Growth Model (COE: 8.7%; ROE: 12.7%). We use a Gordon Growth Model-derived P/BV to value the company given the cyclicality of the business. A downside risk is a deterioration in customer demand. An upside risk is higher orders from its major customer.








Non-SGX Report: Hi-P International Limited: Aiming for M&A-Driven Growth

Hi P International

Non-SGX Report: Hi-P International Limited: Aiming for M&A-Driven Growth