KUALA LUMPUR (Feb 21): HwangDBS Vickers Research (HDBSVR) expects Notion VTec to see a recovery in the current financial year (FY12), underpinned by the hard disk drive (HDD) segment.
It said on Tuesday that it was maintaining a Buy with a target price of RM2.10.
HDBSVR said Notion VTec posted losses in 1QFY12 (October to December 2011) registered losses after flooding at Notion’s factories in Ayutthaya disrupted operations.
Revenues were hit hard, with camera revenue tumbling the most by 45% on-year to RM16.4 million, while HDD revenue fell 35% to RM13.6 million.
However, the weak result was within its and street expectations. Notion also booked RM5.5 million provisional loss after insurance claims for damaged inventories, plant & equipment.
These caused EBITDA margins to shrink to 11.8% vs 1QFY11’s 41.1%. Separately, Notion VTec announced a three-for-four bonus issue and one-for-four free warrant issue, which would take fully diluted paid-up share capital to RM185.2 million comprising 370.4 million shares, assuming full exercise of its 30.7 million outstanding warrants, implying 11.7 sen FY12F diluted EPS.
Notion Vtec’s Thai plant is expected to resume normal operations by June. Hence, earnings should improve in FY12, underpinned by: (i) higher average selling prices for HDD components given the supply deficit; (ii) additional three Japanese HDD customers; and (iii) the camera segment resuming normal operations by next month. We are retaining our forecasts pending a briefing later this morning.
“The stock has run-up following a series of positive news, but Notion’s exposure to a rapidly recovering HDD sector has yet to be priced in. Our RM2.10 TP is pending review,” it said.
It said on Tuesday that it was maintaining a Buy with a target price of RM2.10.
HDBSVR said Notion VTec posted losses in 1QFY12 (October to December 2011) registered losses after flooding at Notion’s factories in Ayutthaya disrupted operations.
Revenues were hit hard, with camera revenue tumbling the most by 45% on-year to RM16.4 million, while HDD revenue fell 35% to RM13.6 million.
However, the weak result was within its and street expectations. Notion also booked RM5.5 million provisional loss after insurance claims for damaged inventories, plant & equipment.
These caused EBITDA margins to shrink to 11.8% vs 1QFY11’s 41.1%. Separately, Notion VTec announced a three-for-four bonus issue and one-for-four free warrant issue, which would take fully diluted paid-up share capital to RM185.2 million comprising 370.4 million shares, assuming full exercise of its 30.7 million outstanding warrants, implying 11.7 sen FY12F diluted EPS.
Notion Vtec’s Thai plant is expected to resume normal operations by June. Hence, earnings should improve in FY12, underpinned by: (i) higher average selling prices for HDD components given the supply deficit; (ii) additional three Japanese HDD customers; and (iii) the camera segment resuming normal operations by next month. We are retaining our forecasts pending a briefing later this morning.
“The stock has run-up following a series of positive news, but Notion’s exposure to a rapidly recovering HDD sector has yet to be priced in. Our RM2.10 TP is pending review,” it said.
