Sees a slower 2H09. This is because RIM’s existing programmes are winding down faster than new models can ramp up in Q3. Prices and margins of matured products are also diminishing towards end of the products’ life cycles. Despite the slight pick up in Sep for new smartphones and shipments to new customers Dell, Microsoft and HTC, volumes are still low and consumer electronics recovery remains very slow. We also expect residual asset impairment charges on top of start up losses(c. S$1-2m) for the flexible printed circuit operation commencing in Q4.

More meaningful recovery only in FY10. This would be driven by full ramp up of new products/ customers and the resulting operating leverage. Hi-P is deepening relationships with existing blue chip clientele, particularly in the smartphone area, where Hi-P has an early mover advantage with RIM and Palm. Hi-P is also involved with Motorola’s latest suite of smartphones, which if successful would give Hi-P a further boost.

Sees 5-10% cut in consensus estimates. Hi-P has guided for 3Q to decline y-o-y and q-o-q. This forecast is intact from our recent corporate update. On the contrary, we see room for consensus downgrade on net profit forecast of S$80m for FY09. If Q3 is down q-o-q, it is challenging for Hi-P to clock S$20m each for 3Q/4Q. We expect earnings to be S$15m (-6% q-o-q) and S$20m (+38% q-o-q) for 3Q & 4Q respectively.

Downgrade to Hold with unchanged TP of S$0.76. Hi-P has more than doubled YTD compared to STI’s 50% rise. More importantly, we expect weak results to cap share price performance near term. Downgrade to HOLD.