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3 Things To Know About This Company Which Has Fallen 71% From Its 52-Week High And Has A Dividend Yield of 6%

Currently, this company’s shares, at S$0.80 apiece (as of 14 November), have a dividend yield of 6.3% and are down 70.6% from the peak of S$2.72 seen in March this year. The company is also one of the top 200 suppliers globally for the US tech giant, Apple.

Welcome to Hi-P International Ltd (SGX: H17). The firm is an integrated contract manufacturer that provides one-stop solutions for customers from various sectors such as telecommunications, consumer electronics, computing and peripherals.

Let’s learn more about the company by looking at its key historical financial figures in three parts below.

Revenue and profit

We will start off with the income statement. This statement, also known as profit and loss statement, shows us how much revenue the company brought in from the sale of its goods, and how much is left after paying all the various overheads needed to run the business. The leftover portion is known as profit.

The table below shows the key figures from Hi-P’s income statement in its last five financial years (the company has a financial year that ends on 31 December every year):Source: S&P Global Market Intelligence

The company’s revenue, gross profit and net profit have somewhat been erratic from 2013 to 2017. Hi-P went into a net loss in 2015 before recovering in 2016. The net profit margin of 8.5% in 2017 is quite low for my liking.

Cash and debt

Although revenues and profits are important, they do not tell investors the whole story. For instance, the income statement does not show if a company can survive a prolonged economic crisis. That is where the balance sheet comes into play. It can reveal the health of a company by providing a snapshot of its financial condition.

The table below shows the key figures from Hi-P’s balance sheet over the last five years:Source: S&P Global Market Intelligence

Hi-P had more cash than debt on its balance sheet, as of 31 December 2017. It should be able to meet its short-term obligations since its current ratio is healthy.

Cash flow

Many of you may have heard the saying, “Cash is king”. Although the income statement shows the amount of profit a company makes every year, this profit does not necessarily translate into the actual cash that flows into a company’s coffers due to accrual accounting.

Accrual accounting requires businesses to record revenues and expenses when the transactions happen, not when the cash is exchanged. Also, the income statement usually includes non-cash revenues or expenses. To get a true picture of the flow of money in and out of a company, we have to look at the statement of cash flows.

The table below shows the key figures from Hi-P’s statement of cash flows, for the same period as its income statement and balance sheet shown above:Source: S&P Global Market Intelligence

Hi-P had generated positive free cash flows in three out of the five years. Free cash flow is cash that the company can use to dish out dividends to shareholders, buy back shares, make acquisitions, or strengthen its balance sheet, among other things.

The company’s dividend had climbed by 154% annually from S$0.006 per share in 2013 to S$0.25 per share in 2017. To know more about Hi-P’s dividend through a comparison with its counterpart, you can head here.

The Foolish takeaway

Hi-P did well in terms of net profit and free cash flow growth in 2016 and 2017. Going forward, however, the company might get hit by the ongoing trade war between the US and China. It said in its 2018 third-quarter earnings update that it is studying ways to boost its domestic China and non-US business and optimise its other existing manufacturing sites in various countries. Investors who are looking to invest in Hi-P have to be aware of this short-term risk.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.