Stock Name: NOTION
Company Name: NOTION VTEC BHD
Research House: MAYBANK
Notion VTec Bhd
(March 24, RM2.02)
Maintain buy at RM1.98 with target price of RM2.40: A new outsourcing order from Japan could generate a net profit of RM4 million to RM6 million and lift earnings per share (EPS) by three to four sen. We maintain our forecasts for now.
We do not rule out higher outsourcing contracts from Nikon as it reorganises its operations in Japan after the March 11 earthquake and tsunami. Notion Vtec's MSC tax status remains a work in progress but would add another six sen to EPS once approved.
The company remains a small-cap 'buy', with a RM2.40 target price, based on 4.5 times FY11 enterprise value/earnings before interest, taxes, depreciation and amortisation, reflecting regional peers' (ex-Japan) valuations.
There was only one casualty at the Sendai Nikon plant while the safety of three employees remains uncertain. One manufacturing facility, Tochigi Nikon Corp, resumed operations on March 18.
Five more plants (Mito plant ' Nikon Corp, Zao factory ' Nikon-Trimble Co, Tochigo Nikon Precision, Kurobane Nikon and Nasu Nikon) restarted on Wednesday. The Sendai Nikon and Miyagi Nikon Precision facilities, which are the most severely affected, will be operational by end-March.
There has been no immediate cancellation of orders in the camera segment from Notion Vtec's existing Japanese customers, Nikon, Sony and Canon. While Nikon's operations in Japan will fully resume operations from April, Nikon cautioned that its Japan-based production is unlikely to return to pre-crisis levels, as it anticipates intermittent electric supply post the nuclear power plant crisis.
We think Notion Vtec's cam-barrel sales will be affected in the mid-term. However, this setback will be offset by a new business, which Nikon has contracted out to Notion Vtec with immediate effect.
The company has been tasked with the manufacture the body mount (previously produced at the Sendai Nikon factory, Miyagi) at its Klang plant. Nikon will supply the raw materials in the interim period.
The body mount business could generate revenue of RM36 million to RM60 million per year, based on the production of 360,000 to 600,000 pieces a month. We think this could turn into a long-term arrangement for Notion Vtec, if it executes this job well.
Looking at the bigger picture, we think Nikon could relocate its manufacturing facilities to earthquake-free zones (Malaysia, Thailand) later to mitigate value chain disruption. Notion Vtec could be the prime beneficiary. ' Maybank IB Research, March 24
Company Name: NOTION VTEC BHD
Research House: MAYBANK
Notion VTec Bhd
(March 24, RM2.02)
Maintain buy at RM1.98 with target price of RM2.40: A new outsourcing order from Japan could generate a net profit of RM4 million to RM6 million and lift earnings per share (EPS) by three to four sen. We maintain our forecasts for now.
We do not rule out higher outsourcing contracts from Nikon as it reorganises its operations in Japan after the March 11 earthquake and tsunami. Notion Vtec's MSC tax status remains a work in progress but would add another six sen to EPS once approved.
The company remains a small-cap 'buy', with a RM2.40 target price, based on 4.5 times FY11 enterprise value/earnings before interest, taxes, depreciation and amortisation, reflecting regional peers' (ex-Japan) valuations.
There was only one casualty at the Sendai Nikon plant while the safety of three employees remains uncertain. One manufacturing facility, Tochigi Nikon Corp, resumed operations on March 18.
Five more plants (Mito plant ' Nikon Corp, Zao factory ' Nikon-Trimble Co, Tochigo Nikon Precision, Kurobane Nikon and Nasu Nikon) restarted on Wednesday. The Sendai Nikon and Miyagi Nikon Precision facilities, which are the most severely affected, will be operational by end-March.
There has been no immediate cancellation of orders in the camera segment from Notion Vtec's existing Japanese customers, Nikon, Sony and Canon. While Nikon's operations in Japan will fully resume operations from April, Nikon cautioned that its Japan-based production is unlikely to return to pre-crisis levels, as it anticipates intermittent electric supply post the nuclear power plant crisis.
We think Notion Vtec's cam-barrel sales will be affected in the mid-term. However, this setback will be offset by a new business, which Nikon has contracted out to Notion Vtec with immediate effect.
The company has been tasked with the manufacture the body mount (previously produced at the Sendai Nikon factory, Miyagi) at its Klang plant. Nikon will supply the raw materials in the interim period.
The body mount business could generate revenue of RM36 million to RM60 million per year, based on the production of 360,000 to 600,000 pieces a month. We think this could turn into a long-term arrangement for Notion Vtec, if it executes this job well.
Looking at the bigger picture, we think Nikon could relocate its manufacturing facilities to earthquake-free zones (Malaysia, Thailand) later to mitigate value chain disruption. Notion Vtec could be the prime beneficiary. ' Maybank IB Research, March 24
No comments:
Post a Comment