Stock Name: NOTION
Company Name: NOTION VTEC BHD
Research House: RHB
Notion Vtec Bhd
(March 15, RM3.14)
Initiating coverage with an outperform recommendation, fair value of RM4.59 based on 10 times FY2011 earnings: We like Notion for the following reasons: 1) growing demand in the PC & consumer electronics segment; 2) partnership & technological enhancement in the entrance of a corporate shareholder; 3) high earnings & stable margins; and 4) high technical capabilities.
Notion, which supplies high precision components to the world's biggest manufacturers such as Western Digital (WD), Seagate, Hitachi, Nikon, and Continental, has three main business segments: 1) hard disk drives (HDD); 2) camera; and 3) auto & industrial.
Notion is expected to produce 2.5" base plates components extensively with initial production of 100,000 units per month rising sharply to one million units per month by June and two million pieces per month by end-2010.
We estimate FY2010-2012 EPS compounded average growth rate (CAGR) of 34.6% on good earnings for the next 24 months given the strong demand outlook for all business segments. We have derived a target PER of 10 times which implies a 29% discount to the peers' weighted average FY2011 PER of 14 times as historically the share has been trading at these levels. Therefore, we estimate a fair value of RM4.59 based on 10 times FY2011 EPS.
We expect the HDD segment to be the main revenue contribution accounting for 45%-47% (vs 43% and 44% in FY08 and FY09 respectively). We expect FY2011-2012 revenue growth of 30% and 25% respectively driven mainly by; 1) robust order from Samsung and WD; and 2) stronger global HDD demand stemming from rising PC and consumer electronics (CE) sales.
Also, we believe the camera segment will eventually overtake HDD's revenue contribution in 2012 due to: 1) higher volume growth for cameras given volume loadings from Nikon; and 2) camera ASP to remain stable, supported by a growing proportion of camera barrel lens that are more complex.
We forecast sales for the camera segment to grow by 25%, 37%, and 40% in FY2010, FY2011, and FY2012 respectively given volume loadings from Nikon, which recently acquired 8.98% of Notion via a private placement exercise which raised some RM33.8 million. - RHB Research Institute, March 15
This article appeared in The Edge Financial Daily, March 16, 2010.
Company Name: NOTION VTEC BHD
Research House: RHB
Notion Vtec Bhd
(March 15, RM3.14)
Initiating coverage with an outperform recommendation, fair value of RM4.59 based on 10 times FY2011 earnings: We like Notion for the following reasons: 1) growing demand in the PC & consumer electronics segment; 2) partnership & technological enhancement in the entrance of a corporate shareholder; 3) high earnings & stable margins; and 4) high technical capabilities.
Notion, which supplies high precision components to the world's biggest manufacturers such as Western Digital (WD), Seagate, Hitachi, Nikon, and Continental, has three main business segments: 1) hard disk drives (HDD); 2) camera; and 3) auto & industrial.
Notion is expected to produce 2.5" base plates components extensively with initial production of 100,000 units per month rising sharply to one million units per month by June and two million pieces per month by end-2010.
We estimate FY2010-2012 EPS compounded average growth rate (CAGR) of 34.6% on good earnings for the next 24 months given the strong demand outlook for all business segments. We have derived a target PER of 10 times which implies a 29% discount to the peers' weighted average FY2011 PER of 14 times as historically the share has been trading at these levels. Therefore, we estimate a fair value of RM4.59 based on 10 times FY2011 EPS.
We expect the HDD segment to be the main revenue contribution accounting for 45%-47% (vs 43% and 44% in FY08 and FY09 respectively). We expect FY2011-2012 revenue growth of 30% and 25% respectively driven mainly by; 1) robust order from Samsung and WD; and 2) stronger global HDD demand stemming from rising PC and consumer electronics (CE) sales.
Also, we believe the camera segment will eventually overtake HDD's revenue contribution in 2012 due to: 1) higher volume growth for cameras given volume loadings from Nikon; and 2) camera ASP to remain stable, supported by a growing proportion of camera barrel lens that are more complex.
We forecast sales for the camera segment to grow by 25%, 37%, and 40% in FY2010, FY2011, and FY2012 respectively given volume loadings from Nikon, which recently acquired 8.98% of Notion via a private placement exercise which raised some RM33.8 million. - RHB Research Institute, March 15
This article appeared in The Edge Financial Daily, March 16, 2010.
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