DMG downgrades Hi-P to 'sell' from 'neutral'

Stock Name: Hi-P
Company Name: HI-P INTERNATIONAL LIMITED

Research House: DMG

Price Call: SELL

Target Price: 0.59

DMG & Partners downgraded electronics contract manufacturer Hi-P International to ‘sell’ from ‘neutral’ and cut its target price to $0.59 from $0.74, citing a negative impact from weaker-than-expected demand for Apple's iPhone 5.

By 9:55 a.m., Hi-P shares were down 3% at $0.80, but have gained 32% since the start of the year, compared with a 26.7% rise in the FTSE ST Industrials Index.

DMG slashed its 2012 and 2013 earnings estimates for Hi-P by 51% and 48.6% respectively, as it expects demand for Apple's iPhone 5 may fall "drastically" next year due to rising competition from Android and Windows phones.

“Thought to be a proxy to Apple’s iPhone 5, we believed that Hi-P now has been overwhelmed by how fast things have changed in the technology industry," said DMG in a note.

Hi-P also invested $300 million in a Chinese plant, of which a large part of the production capacity was dedicated to Apple. However, Hi-P may be hurt as Apple shifts more production back to the U.S., DMG noted.