Stock Name: NOTION
Company Name: NOTION VTEC BHD
Research House: RHB
Notion VTEC Bhd
(May 3, RM3.03)
Maintain outperform at RM3.17 with fair value of RM4.64: The management expects revenue and profit to grow over the next two years on the back of: (1) stronger-than-expected demand for mobile computing and consumer electronics; and (2) higher utilisation rate for the camera segment as demand for SLR cameras picks up.
We note that the 2QFY10 utilisation rates for hard disk drive (HDD) and the camera segments were 90% and 50% respectively.
Given the rapid growth in demand for data storage, Samsung is planning to ramp up its capacity for 2.5'' HDD. Notion thus plans to raise its own monthly unit production targets to one million by September 2010, five million in FY11 and seven million in FY12 versus previous targets of three million in FY11 and five million in FY12.
Assuming Notion hits these targets, our FY11-FY12 revenue estimates could be raised by 35% and 25% per annum, respectively.
While we are positive on Notion's long-term earnings outlook, we are maintaining our forecasts for now. The management warned that there is some risk that capacity ramp-up and product testing costs for its 2.5" base plate and spindle motor lines could dampen earnings in the next two quarters.
Nevertheless, longer term, we believe there is potential upside to our FY11-FY12 forecasts arising from: (1) stronger-than-expected sales of spindle motor hubs and 2.5'' base plates; (2) stronger contribution from its Thailand and Klang operations, capitalising on the rapid expansion of key customers, Alphana Tech and Samsung; and (3) higher contribution from the auto segment.
We maintain our indicative fair value of RM4.64 based on a target FY09/11 price-earnings ratio (PER) for now although we note that after adjusting for the potential dilution arising from the proposed 10% private placement and 1-for-5 rights issue of free warrants, our fair value would fall to RM3.87.
Nevertheless this would still imply 22.1% upside. Maintain outperform. - RHB Research Institute, May 3
This article appeared in The Edge Financial Daily, May 4, 2010.
Company Name: NOTION VTEC BHD
Research House: RHB
Notion VTEC Bhd
(May 3, RM3.03)
Maintain outperform at RM3.17 with fair value of RM4.64: The management expects revenue and profit to grow over the next two years on the back of: (1) stronger-than-expected demand for mobile computing and consumer electronics; and (2) higher utilisation rate for the camera segment as demand for SLR cameras picks up.
We note that the 2QFY10 utilisation rates for hard disk drive (HDD) and the camera segments were 90% and 50% respectively.
Given the rapid growth in demand for data storage, Samsung is planning to ramp up its capacity for 2.5'' HDD. Notion thus plans to raise its own monthly unit production targets to one million by September 2010, five million in FY11 and seven million in FY12 versus previous targets of three million in FY11 and five million in FY12.
Assuming Notion hits these targets, our FY11-FY12 revenue estimates could be raised by 35% and 25% per annum, respectively.
While we are positive on Notion's long-term earnings outlook, we are maintaining our forecasts for now. The management warned that there is some risk that capacity ramp-up and product testing costs for its 2.5" base plate and spindle motor lines could dampen earnings in the next two quarters.
Nevertheless, longer term, we believe there is potential upside to our FY11-FY12 forecasts arising from: (1) stronger-than-expected sales of spindle motor hubs and 2.5'' base plates; (2) stronger contribution from its Thailand and Klang operations, capitalising on the rapid expansion of key customers, Alphana Tech and Samsung; and (3) higher contribution from the auto segment.
We maintain our indicative fair value of RM4.64 based on a target FY09/11 price-earnings ratio (PER) for now although we note that after adjusting for the potential dilution arising from the proposed 10% private placement and 1-for-5 rights issue of free warrants, our fair value would fall to RM3.87.
Nevertheless this would still imply 22.1% upside. Maintain outperform. - RHB Research Institute, May 3
This article appeared in The Edge Financial Daily, May 4, 2010.
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