HIP will spend RMB129.5mln (S$25.9mln) to acquire a China-based (in Suzhou) printed circuit board producer (Global Flex) to help them with a lower cost and time effective solution to address immediate customer demand in the wireless handset market.

This is also in line with the company’s strategy of adding capabilities to become an integrated electromechnical contract manufacturer.

As the acquisition price is close to the asset value of the company, there would be no goodwill involved. Global Flex is operating at breakeven levels, hence there is no acquisition PE. 􀁺 Based on HIP’s 1Q ‘09 net cash position of $201.4mln, it would have no problem funding the acquisition internally.

Since our last HOLD recommendation, HIP has not done much, trading between a range of mid 50s to low 70s which we believe reflects the likely weak 2Q ‘09 performance as well as potentially weak 3Q ‘09 guidance reflecting the lack of new product ramp at Research In Motion after the earlier ramp in late 2008 and early 2009.

We continue to expect the stock to remain rangebound until Research In Motion launches new products in the later part of this year as well as more meaningful contributions from new smart phone customers.

With the stock currently at the high end of the range, it suggests a Trading Sell and would be a Trading BUY when the stock retraces to the lower end of the range (see Exhibit 3 below).