Here to induce people to buy so they can fry up Hi-P share price so i can sell to them...
After Hi-P released its FY 2017 results, I read it and became super-bullish about it. IMO, i think the minimum upside for Hi-P's share price is 30%. Refer to the below link for more info
1. Growing revenue, profit margin and net profit
This is the super-combination of earning growth catalysts all present in Hi-P, and makes me super bullish on Hi-P because of the multiplier effect that growing profit margins and revenue have on net profit.
2. Low P/E ratio relative to growth potential
Hi-P achieved a 15.05 cents EPS for 2017. Assuming it has a share price of 2 dollars, this gives us a P/E ratio of 13.3. In FY 2017, Hi-P achieved net profit growth of 125% as it turned around from a poor FY 2016. I do not expect such level of net profit growth for FY 2018, but I do expect very significant growth potential in the forseeable future.
3. Extremely bullish outlook guided by management
"As a sign of confidence in the Group’s outlook and to reward shareholders for their continued support,
the Board of Directors recommends a final dividend of 4.0 Sing cents, bringing total dividends for
FY2017 to 25 Sing cents (FY2016: 0.8 Sing cents).
Looking ahead, the Group expects the momentum to continue as management expects higher revenue and profit for FY2018 as compared to FY2017. In the near term, the Group has increased its inventories to S$178.5 million as at 31 December 2017 (31 Dec 2016: S$142.9 million) as revenue and profit for 1Q2018 is expected to be higher than 1Q2017.
“In FY2017 and 4Q2017, we set new records in revenue and profit. This tremendous improvement to our financial performance is validation for our efforts following the challenges we faced two years ago. We turned around quickly, setting the right strategies to improve our operational performance and grow the business. Our deeply-rooted management philosophies have been at the core of our operations. Internally,
we have implemented motivation mechanisms that foster an entrepreneurial spirit and
compliance with Hi-P’s best practices. With this, the Group successfully executed initiatives
aimed at improving operational and financial performance.
Having laid a strong foundation for growth, we do not intend to stop here as we are well positioned
to reap economies of scale and achieve growth multiplier effect going forward.”
Barring any other unforeseen circumstances, the Group wishes to guide its performance as follows:
- The Group expects higher revenue and profit in 1Q2018 as compared to 1Q2017
- The Group expects lower revenue and profit in 1Q2018 as compared to 4Q2017
- The Group expects higher revenue and profit in FY2018 as compared to FY2017
The phrases 'economies of scale' and 'achieve growth multipler' should tell you that HI-P is extremely likely to further improve on its profit margins in the upcoming future!
4. Positive macro-outlook
Hi-P is a a global contract manufacturer of smart phones, tablet computers and other consumer electronics. I believe such an industry is poised to benefit greatly when times are good as people have greater disposable income to spend on consumer electronics. If you read the news, you will know that the world appears to have entered a broad-based global economic rally. If this holds true, you can imagine the millions or billions of people in developing economies and emerging markets who will start to acquire sufficient purchasing power to buy consumer electronics.
5. Generous dividends given out to shareholders
4 cents dividend given out compared to 7.39 EPS achieved in 4Q
"Confident in the Group’s future, the Board of Directors recommends a final dividend of 4.0 Sing
cents, bringing total dividends for FY2017 to 25 Sing cents (FY2016: 0.8 Sing cents)"
2 cents dividend given out compared to 4.73 EPS for 3Q
"Board of Directors recommends an interim dividend of 2.0 Sing cents (3Q2016: 0.4 Sing cents)
to reward shareholders"
19 cents dividend given out as a one-off in 2Q
"The Board of Directors recommends an interim dividend of 19 Sing cents per share to reward shareholders for their support"
This is a management confident in the company's future and unafraid of sharing its earnings with its shareholders. After all, its CEO has an 83% stake in Hi-P. Excluding the one-off 19 cent dividend, the management has given 6 cents of dividends, which is a 3% dividend yield if you own Hi-P shares at 2 dollars. Given Hi-P's strong cashflows, positive outlook, and the CEO's massive stake in Hi-P, I am confident that Hi-P will continue to generously reward its shareholders with dividends in the coming years ahead.
Assuming Hi-p is at a market price of 2 dollars, based on its FY 2017 results, it enjoys growing revenue, profit margins and net profits, and is valued at a P/E ratio of 13.3. Its management has generously rewarded shareholders with dividends, and is extremely confident about Hi-P's future. Furthermore, it is backed by bullish macro-tailwinds of a global economic rally. For a company to achieve significant earnings growth, it usually requires the twin pillars of 1. increased revenue and 2. increased profit margins, both of which HI-P is very, very confident in achieving. As such, my minimal upside expected for HI-P is 30% growth to be achieved in FY 2018, though i would not be surprised if it significantly exceeds that target.