HI-P INTERNATIONAL | BUY
TARGET PRICE: $1.07
MAY 23 CLOSE: $0.87
DBS Group Research, May 23
The smartphone and Internet of Things segments are expected to continue to do well in the next one to two years. Hi-P is capitalising on this, with the ramp-up in production.
Hi-P is expected to expand production, in particular at its Suzhou plant, in preparation for orders from its new customers, and also new products from existing customers.
Overall utilisation rate for Q1 2017 was below 40 per cent.
With the expected ramp-up, we expect utilisation rate to reach 60 per cent to 70 per cent in the next one to two years.
Hi-P could be an attractive target for global companies looking to build a base in Asia.
There is still no concrete succession plan announced by its executive chairman and chief executive officer, Mr Yao Hsiao Tung, who has a 61 per cent stake in the company.
EZION HOLDINGS | HOLD
TARGET PRICE: $0.32
MAY 23 CLOSE: $0.275
OCBC Investment Research, May 23
AusGroup recently announced that it will invite holders of its $110 million notes (due next year) to exchange the notes for new ordinary shares of AusGroup. It is also proposing to undertake a capitalisation of the shareholder loan from Ezion Holdings via the issuance of new shares.
The issue price is $0.058, a premium of 6.6 per cent above the volume weighted average price on May 18.
The maximum amount of the shareholder loan (includes both principal and interest) to be capitalised is $42.5 million, and this would bring Ezion's stake from 17.8 per cent to a maximum of 29.9 per cent in AusGroup.
Recall that AusGroup acquired Port Melville and related assets in 2014, and notes were issued to fund this as well as construct additional facilities such as fuel storage tanks for the port.
VIVA INDUSTRIAL TRUST | BUY
TARGET PRICE: $0.85
MAY 23 CLOSE: $0.815
RHB Research, May 22
Viva announced a settlement arrangement with Jackson Internationalthis morning that would result in a higher rent guarantee buffer and better occupancy at its Jackson Square (JS) property.
The move is positive and would mitigate market concerns over the potential drop in rental income.
We expect occupancy at JS to move back to 85 per cent to 90 per cent by the end of the year, due to its central location. The stock offers attractive yields of 9.1 per cent/9.3 per cent for FY17 forecast/ FY18 forecast.
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