Stock Name: NOTION
Company Name: NOTION VTEC BHD
Research House: RHB
Notion Vtec Bhd
(May 20, RM2.69)
Maintain outperform at RM2.73 with higher fair value of RM4.68: According to the management, construction work on its new 150,000 sq ft plant is near completion. The new plant, which is expected to house most of the base plate production capacity, is set to commence production by September 2010.
Note that the management expects capex of around RM80 million to ramp up the base plate capacity to one million per month, five million/month, and seven million/month by FY10-FY12 respectively from 350,000-400,000 per month currently versus 100,000 per month in January 2010, pending the arrival of additional equipment and machinery.
The company expects stronger volume loading in 2H10 from Western Digital (WD) on the back of strong demand for hard disk drive (HDD) components ' antidisks, disc clamp, and spacers ' as well as WD's market share gain.
Recall that WD overtook Seagate as the No 1 HDD vendor in 1Q10. WD now expects to increase its total HDD shipments by more than 20%. While Notion's current capacity for these components is 800,000-900,000 per month, the management is expecting to increase capacity to 1.5 million-2 million per month by end-2010.
Given the volume loading of the HDD segment, as well as the anticipation of a robust demand for data storage, we have re-adjusted our forecast assumptions.
Given the anticipation of higher costs this year stemming from higher start-up costs and product testing, we have trimmed our FY10 net profit forecast by 4.3% to RM53.6 million.
However, given stronger volume loading as well as tight cost control and higher utilisation rate, we have tweaked upwards our FY11-FY12 net profit by 0.8% per annum.
After the revision in earnings, our indicative fair value has been raised to RM4.68 from RM4.64 based on 10 times target FY09/11 PER (price-earnings ratio). We are maintaining our outperform call on the stock. ' RHB Research Institute, May 20
This article appeared in The Edge Financial Daily, May 21, 2010.
Company Name: NOTION VTEC BHD
Research House: RHB
Notion Vtec Bhd
(May 20, RM2.69)
Maintain outperform at RM2.73 with higher fair value of RM4.68: According to the management, construction work on its new 150,000 sq ft plant is near completion. The new plant, which is expected to house most of the base plate production capacity, is set to commence production by September 2010.
Note that the management expects capex of around RM80 million to ramp up the base plate capacity to one million per month, five million/month, and seven million/month by FY10-FY12 respectively from 350,000-400,000 per month currently versus 100,000 per month in January 2010, pending the arrival of additional equipment and machinery.
The company expects stronger volume loading in 2H10 from Western Digital (WD) on the back of strong demand for hard disk drive (HDD) components ' antidisks, disc clamp, and spacers ' as well as WD's market share gain.
Recall that WD overtook Seagate as the No 1 HDD vendor in 1Q10. WD now expects to increase its total HDD shipments by more than 20%. While Notion's current capacity for these components is 800,000-900,000 per month, the management is expecting to increase capacity to 1.5 million-2 million per month by end-2010.
Given the volume loading of the HDD segment, as well as the anticipation of a robust demand for data storage, we have re-adjusted our forecast assumptions.
Given the anticipation of higher costs this year stemming from higher start-up costs and product testing, we have trimmed our FY10 net profit forecast by 4.3% to RM53.6 million.
However, given stronger volume loading as well as tight cost control and higher utilisation rate, we have tweaked upwards our FY11-FY12 net profit by 0.8% per annum.
After the revision in earnings, our indicative fair value has been raised to RM4.68 from RM4.64 based on 10 times target FY09/11 PER (price-earnings ratio). We are maintaining our outperform call on the stock. ' RHB Research Institute, May 20
This article appeared in The Edge Financial Daily, May 21, 2010.
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