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Hi-P – Chart looks interesting with rising ADX, amid positively placed DI (21 Feb 19)

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This week, Hi-P caught my attention due to its chart. It last trades at $0.990. Day range 0.985 – 1.00. Let’s take a look.

Basis below

1.Chart looks interesting with rising ADX, amid positively placed DI

Hi-P has been trading in a tight range $0.885 – 0.960 since 8 Jan 2019 and broke out with strong volume on 11 Feb 2019. ADX has been rising to trade 31.6 amid positively placed DI, indicative of a trend. RSI last trades 57.9. Today is T+8 of 11 Feb upmove. There has been some price weakness on 15 & 18 Feb as I think some contra players exited their positions. Share price has consolidated for 8 trading days. Short term exponential moving averages (e.g. 20D, 50D and 100D EMA) are trending higher with golden cross formations. Long term moving averages such as 200D SMA and 200D EMA have yet to follow suit.

For the chart to turn decidedly bullish, Hi-P has to breach $1.09-1.11 with volume expansion and on a sustained basis.

Near term supports: $0.970 / 0.960 / 0.935-0.940

Near term resistances: $1.05 / 1.09 / 1.11

Chart 1: Hi-P chart looks interesting

Hi-P chart 21 Feb pm

Source: InvestingNote (21 Feb pm) This chart was added in later hence the price does not seem the same as my price above.

2.Lowered expectations in FY18F and FY19F – easier for a results beat

Based on my manual and personal compilation of analysts’ estimates, the analysts have lowered their results expectations for FY18F and FY19F. In fact, they are expecting FY19F to be significantly weaker than FY18F. It may arguably be easier for Hi-P to beat given low expectations. (For a balance view, please see related risk below.)

Table 1: Analysts have lowered their results expectations for FY18F and FY19F

DBS Maybank
9MFY18 9MFY17 FY19F FY18F FY19F FY18F
Revenue 960.2 935.0 1,143 1,301 1,340 1,323
Gross profit
Net profit 56 62 67 84 60 75

Source: Ernest’s manual compilations; analyst reports

3.Dividend yield looks good

Hi-P gave out a 4QFY17 dividend of S$0.04 / share. If it can continue to give out the same amount in 4QFY18F, inclusive of the 2QFY18 interim dividend of S$0.01 / share, FY18F dividend will amount to a total of S$0.05 / share. This translates to approximately 5.1% dividend yield which i feel it is quite attractive for a mid cap stock.

4.Active share buyback amid strong net cash position

Hi-P has been active in its share buyback. Based on 3QFY18 results, Hi-P is sitting on a net cash position of S$63.5m. With such a strong net cash position, my personal view is that Hi-P is likely to continue on its share buyback. Furthermore, this stands them in good stead while maneuvering in a challenging environment.

5.Hi-P lags some other tech stocks’ share price performance

Other technology stocks such as AEM and Venture have jumped 22-25% from their 4 Jan intraday lows. Hi-P has lagged the other stocks by rising approximately 19% from the 4 Jan intraday lows.

As usual, for any stock, besides market risk (it is noteworthy that Nasdaq and Dow have soared for eight consecutive weeks), there are many risks to be aware of. Examples of risks include (but not limited) to the following:

1.Tech sector not in favour

It is evident that the technology sector, particularly in Singapore is not in favour at the moment. Even if Hi-P beats results, there is always the possibility that share price may not move much.

2.Macro factors in play eg U.S. & China trade tensions

If U.S. And China trade tensions worsen, this is likely to have an adverse effect on Hi-P, both in terms of business and sentiment on the technology sector.

3.Volatile share price – double edge sword

Average daily range for Hi-P is around $0.035 or 3.5% of its share price. This is a volatile stock and can swing quite a bit. Readers with lower risk threshold should take note of this.

4.No direct access to management and not familiar with Hi-P’s specific fundamental

I have no direct access to management. What interests me to take a closer look (in the first place) is its chart.

5.Upcoming results – possible event risk

As usual, similar like my Sing Medical write-up (click HERE), it is noteworthy that Hi-P reports results before the opening of trading tomorrow. As I am not familiar in Hi-P’s specific fundamentals, I have no visibility in its upcoming 4QFY18 results. As you are aware, results are an event risk. Results which beat analysts’ estimates coupled with confident outlooks are likely to cause the share price to rise and vice versa.

 

Conclusion

Hi-P’s chart seems to be strengthening with rising ADX amid positively placed DI. It has to breach the resistance $1.09 – 1.11 on a sustained basis and with volume expansion for it to be more bullish. Dividend yield looks attractive too if it can give out the same amount of dividend as per 4QFY17. Nevertheless, readers should take into account of the above risk factors (note the list of risks is not exhaustive) too. Readers who wish to know more on Hi-P can refer to SGX for more information and HERE for the analyst reports.

Readers who wish to be notified of my write-ups and / or informative emails, can consider signing up at http://ernest15percent.com. However, this reader’s mailing list has a one or two-day lag time as I will (naturally) send information (more information, more emails with more details) to my clients first. For readers who wish to enquire on being my client, they can consider leaving their contacts here http://ernest15percent.com/index.php/about-me/

P.S: I am vested in Hi-P for a potential trading play and aim for a few bids of profit if any. I have highlighted Hi-P to my clients this morning when it is $0.990-0.995. Do note that as I am a full time remisier, I can change my trading plan fast to capitalize on the markets’ movements.

 

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