Another excellent set of 4Q08 numbers, after impressive 2Q08 and 3Q08 results, should reinforce investor confidence in Hi-P. FY09 outlook while challenging is still better than industry, due to stable wireless segment. With net cash of 15 cents per share, Hi-P is attractive at ex-cash FY09 PER of 2.0x and only 0.5x FY09 book value. The stock also pays DPS of 2.2cts, translating to 7% for FY08. Maintain Buy.

Impressive earnings and cash flow. 4Q08 net profit of S$25m (-2% qoq, -19% yoy), was much better than our S$13m expectations, mainly due to (i) much better gross margins of 20%, which improved from 17% in 3Q08 helped by lower oil price and unrealized forex gains at Poland plant (ii) revenue of S$272m (+7.5% qoq, -13.2% yoy) was also better than our expectations as Hi-P continues to churn more volume for RIM. Operating cash flow was very impressive at S$43.8m (+405% qoq, +329% yoy) as inventory and cash receivables showed significant improvement. The company declared final dividend of 2.2 cents (7% yield), better than our expectations of 2 cents.

Decent FY09 outlook despite challenges. Management has guided for similar profits yoy in 1Q09 despite lower revenue, through better-cost control. While management is optimistic about growing its topline in FY09, we forecast 10% decline mainly due to weakness in the consumer electronics business given lower consumer spending. We have assumed stable wireless business, as it would benefit from addition of a new customer in 3Q08. Assuming 17.5% gross margins versus 18.3% in FY08, we expect FY09 earnings to decline 28%. Our forecasts could prove conservative if cost control can keep margins stable.

Candidate for bargain hunting. With net cash of 15 cents per share, Hi-P is trading at (i) 0.5x FY09 book value and (ii) ex-cash FY09 PER of 2.0x. Based on its historic P/BV range of 0.48x – 9.18x, we recommend BUY, with revised target price of S$0.55 pegged to 0.8x FY09 BV.