HI-P INTERNATIONAL | BUY
OCT 3 CLOSE: $1.435
TARGET PRICE: $1.67
DBS Group Research, Oct 3
Riding on the growth trajectory in the smartphone and IoT markets, Hi-P is in a sweet spot as more than half of its earnings are derived from the Wireless (smartphone) and Computer Peripherals (IoT segment, eg, smart home) sectors, which are expected to continue to do well in the next one to two years.
The strong earnings momentum since H2 2016, on the back of operational efficiency, new customers and new product launches, further reinforces our conviction.
We are the only broker covering Hi-P. We believe the market under-appreciates the potential of the capacity ramp-up and Hi-P's strong cash-generating capabilities.
The strong results this year, which is traditionally a much weaker period compared to H2, should help to allay the market's scepticism on Hi-P.
Our FY2017 and FY2018 earnings were raised by 3 per cent each, after factoring in further ramp-up in production.
We have pegged a PE valuation of 13.2 times on FY2018 earnings for Hi-P, as peers have re-rated after the strong results from Apple.
Our target price works out to $1.67, up from $1.45 previously.
TALKMED GROUP | BUY
OCT 3 CLOSE: $0.615
TARGET PRICE: $0.69
RHB Research, Oct 3
Mesenchymal stem cells (MSCs) are currently used in regenerative medicine and therapy overseas for aesthetics and other purposes.
TalkMed Group sees huge potential in this area, in which its 60 per cent-owned Stem Med Pte Ltd has embarked on a research and clinical programme for MSC use in the region.
However, the main monetisation of these therapies domestically is likely to come only when the regulations change.
We visited Stem Med and came away feeling positive on the prospects and synergies envisioned with TalkMed's services.
However, Singapore regulatory requirements are key for its ramp up.
Management believes this is likely to change in the next few years and it aims to be the first mover in Singapore when such changes occur.
We do expect more costs and losses to be incurred by Stem Med going forward.
Hence, we cut TalkMed's FY2017-2018 earnings by 5.5 per cent to account for these additional losses from its subsidiary.
This results in a lower discounted cashflow-backed $0.69 target price (from $0.73).
However, we believe the stock is trading at an attractive valuation due to the temporary drop in earnings after the suspension of key man Dr Ang Peng Tiam, and accompanied by M&A activities - a near-term possibility.
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