Hi-P pops the champagne on robust wireless, computer parts business

Utilisation has improved to 60-70% from 40% in Q1.

Electronics firm Hi-P International (Hi-P) is all smiles as it is expected to ride on its growth in earnings from its wireless and computer peripherals segments.

According to DBS Equity Research, the two business units are expected to do well in the next two year.

"The strong earnings momentum since 2H16, on the back of operational efficiency, new customers and new product launches, further reinforces our conviction," DBS analyst Lee Keng Ling said.

Hi-P's capacity utilisation has improved from less than 40% in Q1 to 60-70% now.

Utilisation rate is expected to reach a peak of 70% by Q4.

Hi-P is expected to expand production in its Suzhou plant to prepare for new product launches from existing customers from the mobile and IoT segments.

Construction of the Suzhou plant should begin in the first half of 2018.

DBS said a stronger production ramp-up and demand would boost sales whilst better operational efficiency would improve margins.

Here's more from DBS:

We believe the market under-appreciates the potential of the capacity ramp-up and Hi-P’s strong cash-generating capabilities. The strong results in 1H17, which is traditionally a much weaker period compared to 2H, should help to allay the market's scepticism on Hi-P.

Hi-P declared 19 cents special DPS post-delivery of a strong set of 3Q17 results. The share price was still above the pre-dividend announcement level after the shares went ex-dividend for the 19 cents DPS on 28 August 17, which we believe, signals a strong conviction on the stock. In the past 10 years at least, Hi-P had not declared any special dividends.