SINGAPORE (Feb 17): OSK DMG has downgraded Hi-P International to "neutral" from "buy" and cut its price target to 72 cents, pegged at parity to FY2015 book value, from 87 cents.

While the contract manufacturer's 2014 earnings rose 63.5% to $10.5 million, the improvement was largely due to one-off items, such as insurance claims, OSK DMG analysts Jarick Seet and Terence Wong said in a report, noting that its net profit would be only $1.4 million without these exceptional items.

"We are a little more bearish after this disappointing quarter, and we expect the next two quarters to continue to be loss-making, due to a higher cost base incurred with the addition of the Nantong factory in China," they said.

"We believe that any potential turnaround, provided it does not encounter any more setbacks, can only happen from 2H15 onwards as there has not been any new product launch from its largest US customer since the start of the year.

"Furthermore, most new product launches typically only come in 2H15."

Hi-P shares fell 2.3% to 64.5 cents at 11:30am (0330 GMT).