Things Getting Back To Pre-Floods Level Swiftly For Notion Vtec

The key to the announcement is the 3 new HDD clients, we can expect the earnings to even surpass pre-floods levels, but the share price is nowhere near RM2.30 yet.

Description	:	Notion (Thailand) Co. Ltd Factory affected by Floods
Announcement Details/Table Section : Further to the announcements made on 11 October 2011 and 23 November 2011,  the Board of Directors of the Company wishes to update on the impact to the Group  arising from the floods on the operations of Notion Thailand Co. Ltd (“Notion Thailand”)  as follows:- 1) Following the dry out by end November 2011, Notion Thailand’s factory located in  Ayutthaya had to be cleaned out and all affected stock and inventory were recovered.  Work-in-Progress and finished goods were sent back to the Group’s factory located in  Klang for cleaning and recovery. 2) Electrical, telecommunication and water supply were fully restored soon after the  drying out. 3) The process of insurance claim is still on-going and only expected to be completed by  March 2012. 4) Notion Thailand will now recommence operations of anodising and sub-assembly of  lens before June 2012 but all support for the Single-lens Reflex (“SLR”) camera  segment will be from the main Klang factory. As a result, the financial impact of the loss  of revenue to the Group arising from our affected Thai factory will be minimal as  Notion Thailand contributed less than 3% to the Group’s revenue. 5) The Group’s business outlook has turned for the better with a strong recovery in  January 2012 sales to much higher than pre-flood level. The trend is expected to be  upwards for the remainder of the financial year ending 30 September 2012 (“FY2012”)  and beyond as the Hard Disk Drive (“HDD”) segment is expected to be in short supply  until mid 2013 due to backlog of orders. The average selling price of HDD is expected  to remain above pre-flood level for multi-quarters ahead. 6) One of our major HDD customers is reportedly estimating full pre-flood operations  by September quarter 2012. 7) With the entrance of 3 new Japanese major customers in the HDD segment and the  ramp up in HDD component sales, we expect FY2012’s revenue to grow in strong  double digit over FY2011. The sustainability of this new business is expected to be good  as the customers’ commitment is assumed to be long term. 8) Meanwhile we expect robust camera orders in February 2012 onwards as the camera  segment is expected to be on route to full pre-flood operations by March 2012 while the  Auto/Industrial segment remains stable. The above is internal management’s estimation and is not a forecast or projection and has  not been reviewed by our external auditors. This announcement is dated 10 February 2012.

Something's Brewing In Notion Vtec

OK, the Nasdaq has gone to an 11 year high. More localised news, the Thailand floods wreaked havoc on the HDD and related components supply chain. While this blog picked it up at 50 sen, JCY's current price and dramatic change in fortunes seems implausible 2 months back.



If you look at the recovery in Notion Vtec, it was OK but nowhere as spectacular as some of the rest in the same industry. There is still a lot of unknowns and uncertainty as to who are the real winners and losers from the Thailand floods.





While JCY did not see any of their factories affected, and they benefited from strong additional clients. I think some investors still think Notion Vtec came off from the floods worse than before. Management has guided analysts that 1Q2012 will see revenue declining 40% q-on-q. However, there are strong newsflow from the industry that Notion Vtec actually benefited significantly from the floods as well. Apparently their Thai factory which was affected only contributed a small portion of revenue.



If one were to dig deeper, fortuitously, they have excess capacity in Klang, and it appears that they have ramped up production there owing to the fact that they have secured 3 new big clients owing to the redirection of logistic supply chain away from the affected areas in Thailand.


Some are hinting that profits and revenue are even higher now than their results prior to the floods. If that is going to be the case, then the share price should be closer to RM2.40-2.50 and not dawdling below RM2.00.



Notion Vtec mother share price and volume:

03/02/2012	1.97	1.91 - 1.97	1.91	-0.06 (3.05%)	506,800
02/02/2012	1.96	1.94 - 1.99	1.97	+0.01 (0.51%)	175,800
31/01/2012	1.94	1.92 - 2.03	1.96	+0.02 (1.03%)	1,654,800
30/01/2012	1.84	1.82 - 1.94	1.94	+0.10 (5.43%)	890,800
27/01/2012	1.83	1.80 - 1.84	1.84	+0.01 (0.55%)	270,000
26/01/2012	1.82	1.82 - 1.86	1.83	+0.01 (0.55%)	305,300
25/01/2012	1.85	1.82 - 1.86	1.82	-0.03 (1.62%)	189,300
20/01/2012	1.84	1.84 - 1.85	1.85	+0.01 (0.54%)	45,000
19/01/2012	1.86	1.83 - 1.86	1.84	-0.02 (1.08%)	93,100

However, if you want to spot something brewing, the sharp uptick in the warrants and volume as well over the past few days may indicate some substantive good news or corporate developments to follow soon.




NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. I may already have shares in the above mentioned stock/s. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Notion Vtec - Working Hand In Hand With Key Partner In Times Of Dislocation

In times of massive uncertainty and dislocation, many businesses will be impacted. The demand for local timber companies would spurt as was reflected in the run in share prices over the past few days. Here, I have to clarify that we should not be assessing the fallout effects as an impartial investor, as that would be making light of the overall terrible human tragedy. We still have to monitor the changes that are taking place but with a sobering mindset.



I have not featured stocks other than Coastal for the past few weeks. I am being very careful in choosing what to write about. After reading through the latest analysts' breifings with Notion's management, and talking to management of the company, I am keen to write something on Notion.

Notion manufactures cam barrels for major camera brands like Nikon and Canon, whose plants were unfortunately hit by the natural disaster that struck Japan last Friday. It was reported on Nikon’s website that it has suspended operations at 4 of its plants, namely Sendai Nikon Corporation (where it produces high-end professional DSLRs like F6), Tochigi Nikon Precision and Miyagi Nikon Precision (which both produce high-quality lens for applications in lithography steppers and scanners used in IC and LCD manufacturing) as well as Tochigi Nikon Corporation which makes interchangeable and optical lenses.

Given the uncertain outlook for HDDs compounded by capacity glut, weak demand for netbooks and the rising demand for alternative storage drives i.e. solid state drives (SSD), Notion islooking to focus on the production of camera lenses. Already, Notion is ramping up in Ayuthaya, Thailand to take on geographical advantages of Nikon’s plant in the area.

Investors looking too closely at their HDD business will be missing the point in assessing Notion because its not a significant business segment for them. If you consider their strategy for the past 2 years, its the camera business segment which they have a strong niche, and much better margins. Their expansion plans in Klang and Thailand are all geared towards that, so too was the inking of the share placement to Nikon.

Its plant in Natori in Sendai, which makes top-end DSLR cameras, is among the factories forced to close after equipment and buildings were damaged. Notion’s camera division contributed >50% of its consolidated revenue as of 1QFY11, with Nikon as its key customer. Prolonged disruption in Nikon’s operation and production could put a dent on our earnings forecasts although management said that there is no immediate stop order on its cam barrel production for now.

All affected Japanese companies are working feverishly to replan their contingencies and production chain flow. Notion has been in active discussions with Nikon to relocate all machining works previously held at Sendai Nikon factory (which is damaged but extent of stop work is uncertain) to Notion Factory 3 which has clean room facilities and ample room for any such contingencies. In fact Notion has 190,000 sf of built up space which was meant for the 2.5" baseplate manufacture now available for such transference of operations. Notion also have enough labour & capacity to take on such a major project at short notice. Sendai factory does a lot of high volume lens mount (the circular metalic part on camera body and the other on lens body) which is in brass and require chroming surface treatment.

The other thing to bear in mind is that factories affected in the Sendai area will take probably a year to be up running again, even then the planning will be affected as we can safely say that there won't be much electricity being supplied owing to the calamity with regards to nuclear power plants. Hence rationing of electricity will be a major issue, which will affect the viability of re-setting up such operations there.

From the way discussions are headed, it is very likely that Nikon will shift a substantial portion of "DSLR camera works" to the Klang factory. Notion being a mindful partner, is willing to work around the issues. The immediate effect should bring in about an additional RM60m a year in revenue as a start.

Besides the financial effect, I believe this brings the ties between the companies a lot closer, and in Notion's case its value as a "trusted valued partner" will be enhanced.



The following was my posting on Notion Vtec last month. I still am comfortable with what I wrote, and I believe the developments over the past few days actually adds to the "inherent value" of the company. The additional revenue would probably boost its net profit by about 10%-15% over the next 12 months.

Notion Vtec - The shares hit a bottom recently at around RM1.70 on very thinly traded volume following the downgrade of earnings. Now almost every analysts and funds seem to be hovering over the company like vultures on under valuation radar. There were rumours of a private equity potential buyout offer at much higher levels a few weeks back as well. That is speculation but what is true is the oversold label for Notion Vtec.

Maybank research came out with a good report recently and that they expect NVB’s 1QFY11 core results to be robust, likely ahead of consensus forecasts. Maybank's current FY11 net profit forecast is 14% above consensus. The camera segment (from new sub-assembly orders) will drive FY11 growth while the HDD section will take a back seat. We maintain our 2-year net profit CAGR forecast of 38% and introduce FY13 forecast. NVB is expected to release its 1QFY11 results in the third week of February. We estimate NVB’s 1Q revenue to be around RM56m-60m (+9-16% QoQ) with net profit of RM11m-14m (+34-71% QoQ) on stronger net margin (+2.4-9.1 ppt QoQ). This would imply 23- 29% of our full-year net profit forecast, and 25-32% of consensus.

While Maybank's estimate for 1Q net profit is already above consensus, I believe even that could be surpassed as the camera business remained solid the last time I spoke to industry experts. The over selling owing to their HDD business has been way overdone, and actually should not figure prominently as a significant segment of their biz model.



Another fact overlooked by many is that they will be getting MSC tax status which could further lift EPS by 6 sen. Maybank sees a target price of RM2.40, I am more bullish with a target of RM2.60 within 3 months. The emergence of any genuine M&A exercise would only be a bonus to their already solid fundamentals.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Commentary About Hot Stocks

MPHB - Finally came out with a plan to buyout the remaining 49% from the funds which took Magnum private in the first place. If MPHB did nothing and just allow the refloatation of Magnum, that would have been a classic "wtf were you guys doing in the first place". If you allow the immediate floatation, MPHB will only gain from a revaluation of its 51% stake as it cannot sell that down, and chances are MPHB minority shareholders will just be standing by the sidelines watching Magnum being relisted. That would have been very bad PR and corporate strategy as the only real gainers would have been the 49% private equity funds, as they can sell at higher prices. If that had happened, we all should wonder what was MPHB thinking in the first place, that would have meant being party to some private equity funds, agreeing to let them take Magnum private and then allowing them to relist the thing later .... what did MPHB gain in between all that? That would have been THE SAME as letting Magnum stay listed, and who knows Magnum may have surged in valuations over the past year as well.



Luckily, MPHB was wise enough to buy the 49% and the price was good. However, MPHB said the acquisition of the stake in Magnum from CVC group, which totalled RM1.6bil, would involve an issuance of around 344 million new MPHB shares at RM2.30 each and cash amounting to around RM809.2mil. OK, here is why the private equity funds agreed to sell, the issuance of new MPHB shares at just RM2.30. This would enhance the actual real gains of these private funds' investment significantly.



But to be fair, this is the better strategy, at least when MPHB relists Magnum, I am sure MPHB shareholders will be getting some "free Magnum shares". Don't jump yet, the quantum is not fixed. It can be as rich as 1 free for every 3 shares, to a not so enticing 1 free for every 10 shares. Even so, we can safely say that there should be a small windfall. I think RM3.10-3.20 is a fair value leading up to the listing of Magnum.

Notion Vtec - The shares hit a bottom recently at around RM1.70 on very thinly traded volume following the downgrade of earnings. Now almost every analysts and funds seem to be hovering over the company like vultures on under valuation radar. There were rumours of a private equity potential buyout offer at much higher levels a few weeks back as well. That is speculation but what is true is the oversold label for Notion Vtec.



Maybank research came out with a good report recently and that they expect NVB’s 1QFY11 core results to be robust, likely ahead of consensus forecasts. Maybank's current FY11 net profit forecast is 14% above consensus. The camera segment (from new sub-assembly orders) will drive FY11 growth while the HDD section will take a back seat. We maintain our 2-year net profit CAGR forecast of 38% and introduce FY13 forecast. NVB is expected to release its 1QFY11 results in the third week of February. We estimate NVB’s 1Q revenue to be around RM56m-60m (+9-16% QoQ) with net profit of RM11m-14m (+34-71% QoQ) on stronger net margin (+2.4-9.1 ppt QoQ). This would imply 23- 29% of our full-year net profit forecast, and 25-32% of consensus.

While Maybank's estimate for 1Q net profit is already above consensus, I believe even that could be surpassed as the camera business remained solid the last time I spoke to industry experts. The over selling owing to their HDD business has been way overdone, and actually should not figure prominently as a significant segment of their biz model.



Another fact overlooked by many is that they will be getting MSC tax status which could further lift EPS by 6 sen. Maybank sees a target price of RM2.40, I am more bullish with a target of RM2.60 within 3 months. The emergence of any genuine M&A exercise would only be a bonus to their already solid fundamentals.

Ekovest - The stock has high volatility because of the numerous big projects facing them. They are likely to get RM1bn-2bn of works in the Iskandar region. Their Danga Bay project may be in for further "exercise" with Tebrau to leverage on the Iskandar themed massive project. They are also awaiting the awardment of the Klang Valley river project said to be worth up to RM8bn in value in ajv with MRCB.



All that seems fine and dandy but what piqued my interest even at levels above RM4.00 is the whispers that they may have secured the 1+3D franchise from Tanjong, in a jv with another party. If you look at Ekovest paltry paid up of just 179m shares. This would really send the counter skyhigh.

Judging from the way the shares moved up and the volume accompanying its trend, there appears to be little or no distribution of shares, which can only mean that its not just a play. I see a lot of upside for Ekovest in the weeks ahead as well as voilatility. Target, what target, how to put any target when we do not have any financials of the deals ... Enjoy the ride.



NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

JCY, Subscribe Or Just Buy Notion Vtec?

The sole shareholder of JCY, Mr. Yong Yoon Kiong, is offering for sale 25.95% of his shareholdings in JCY, consists of 520m shares in an IPO to investors. Of the 520m shares on offer, 470m shares will be offered to institutional investors and 60m shares will be offered to employees and the Malaysian public. The indicative offer price at RM2.00 per share is approximately 20x FY09 P/E. The Retail Offering closes on Feb 8th while the Institutional Offering closes on Feb 10th. Listing for JCY will commence on Feb 25th.

JCY International is one of the world’s largest global precision engineering manufacturers of HDD (hard disk drive) components. It supplies base plates, top covers, actuators, and antidiscs to Seagate and Western Digital, the two leading global HDD manufacturers (26.8% and 31.5% market share respectively). JCY competes on cost and economies of scale, and does this by placing their factories in strategic locations in Malaysia, Thailand and China to be close to their customers. By producing multiple components, JCY has been able to consistently achieve EBITDA margins of 15-16% and ROE levels of above 20%.

Interesting Points To Consider When Compared To Notion Vtec - I have chosen to compare with Notion Vtec because their product range and client base are quite similar, and both are well managed as they both put up the industry's highest ROE at 26% :

a) At RM2.00 JCY has a market cap of RM4.099bn while Notion's market cap is only RM460m. JCY is almost 10x bigger than Notion. The way I look at it, it is a lot easier for Notion to reach RM1bn in market cap than for JCY to reach RM6bn in market cap. If Notion reaches RM1bn, that is a 117% surge, while for JCY to reach RM6bn is only a 50% gain.

b) When you note that both parties have gung-ho clientele, it is hard not to see Notion catching up to JCY's size fast.

c) JCY's is coming in at a historical valuation of 19.8x PER while Notion is now valued at 11.7x current PER. The argument goes that JCY will see a significant 20%-30% jump in EPS in 2010. That is all very well and dandy to give that estimate - if that is really the case, why not list at the end of 2010 and show us the money, don't ask us to believe that there is money at the end of the rainbow.

d) One form of metrics comparison which makes JCY look OK is Price/Sales. JCY's figure is 2.3x while Notion's higher at 2.7x. But when you consider Price/Book Value, JCY looks out of whack again at 5.1x, because Notion's figure at just 2.6x.

e) JCY is in a slightly net cash position of around 2.5 sen per share. Notion is in debt a bit but that's to be expected for a company trying to expand and grow its capacity. In fact, this is even more depressing for JCY as it shows that it has "little room for expansion".

My verdict: I would not be subscribing, I see it settling at RM1.80 following the listing. So difficult to see much upside, if there is any at all considering its RM2.00. If its not a growth stock, then it will be a dividend stock - that would be the support level. For 2009 and 2010(e), the company made RM202m and is slated to make RM207m respectively. That translates into an EPS 10 sen. I will be generous and ascribe profits to grow by 20% for year ending Sep 2010 = EPS 12 sen, and that they will pay 50% of profits as dividends = 6 sen. Assuming a dividend yield of 3.3% = RM1.80, the stock will find plenty of support at that level. I expect Notion to close the gap as more investors start focusing on the outlook and fundamentals of this industry.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

p/s photos: Annie Lau Sum Yau

Press Release By Notion Vtec

(Company No. 637546-D)

NOTION VTEC ANNOUNCES NIKON CORPORATION, TOKYO, JAPAN AS CORPORATE STRATEGIC INVESTOR IN SHARE PLACEMENT

Nikon endorses the Notion Group by Buying a Substantial Stake

KLANG, Selangor – 19^th January 2010 – Notion VTec Berhad (Main Market -Technology: Notion & Code 0083) is pleased today to announced that Notion group have placed 13,844,694 NVB shares representing 10% of outstanding shares prior to the new stock issue to Nikon Corporation ("Nikon") at an issue price of RM 2.44 per share.

The issue price of RM 2.44 which was priced on 6^th January 2010 represents a discount of 10% of the weighted average market price for the five(5) market days immediately preceding the said price fixing date.

Nikon commands a high global standing in the manufacture and sale of camera-related products, such as digital cameras, as well as binoculars and other optical products for consumers, such as ophthalmic lenses. These items complement Nikon’s diverse array of industrial precision equipment that includes semiconductor-related equipment, IC and LCD steppers and scanners, microscopes and measuring instruments. Headquartered in Tokyo, the Nikon group recorded global sales of Japanese Yen 879.719 billion (equivalent to RM33.4 billion) for the year ended 31 March 2009.

The NVB group has been a major supplier of cam barrels (for the SLR cameras) to Nikon since 2005. The camera segment currently contributes approximately 43% of the NVB's group revenue. Having Nikon as a strategic investor should further strengthen the business relationship and create additional opportunities for both the groups. Nikon’s concern on the strong Japanese Yen is also seen as a strategic move by the Group to obtain essential supply of camera components from an efficient supplier such as Notion in non-Yen currencies.

The proceeds raised of approximately RM33.78 million will be used for the expansion plans in Thailand which will create an extra floor space of 200,000 sq ft to the group's facilities. The Notion Thailand plant will in the initial stage mainly cater for Nikon (Thailand) Co Ltd which has indicated that there will be additional orders for camera parts and also possible sub-assemblies in the near future.

“The investment by Nikon Corporation in the equity of Notion is indicative of the strong confidence placed on the Group and should not affect any other camera business that we have,” said Mr Thoo Chow Fah, Executive Chairman of Notion VTec Berhad.

“It is a sign that the Notion group is a key player in the supply chain management of a top notched SLR camera/Interchangeable Lens maker in the world. The camera segment will remain a key contributor to the Notion group’s revenue and profitability.”

(Company No. 637546-D)

“There have been discussions on training of Notion’s staff in Japan and possible future collaborative R&D in the optical and imaging segment which opens up further opportunities for skills development, technology and new business.”

About Notion Group

Notion is a large scale global supplier of high precision parts for the hard disk drive, SLR camera/Lens and Industrial/Automotive industries and amongst its customers are multi-national companies who are market leaders in these industries. Its strength is in product development, engineering, quality assurance, in-house tooling and jigs & fixtures capabilities. Notion will continue to invest in new technologies to stay in the forefront.

Notion was established in 1995 as a precision machining company. Please visit the Investor Relations section of the company website (http://www.notionvtec.com/} for additional investor and financial information.

Disclaimer Regarding Forward-looking Statements

This press release material contains forward-looking statements including expectations, judgment, plans, and strategies. The forward-looking statements are based on management’s assumptions and belief in light of the information currently available. Certain risks, uncertainties and other factors could cause actual results to differ materially from those discussed in the forward-looking statements. Such factors include, but are not limited to: fluctuation of currency exchange rates, overall supply and customer demand, product development and production capabilities, performance of affiliated companies, and other risks and uncertainties. Notion undertakes no obligation to update forward-looking statements to reflect events or circumstances that occur after the date the statements are made.

Notion VTec Berhad, Lot 6123, Jalan Haji Salleh, Batu 5 ½ Jalan Meru, 41050,

Klang, Selangor DE. Tel:03-3361 5615 Fax:03-3392 8482

Notion Vtec's Prospects Reassessed

Following its corporate exercise the shares traded around RM2.60 and as the news began to filter that the 10% new share issue is to be placed out to one of the major clients, Nikon. Nikon has a commanding global share of the high -end DLSR market (circa 40%). As was reported through the Dow Jones Newswires:

http://malaysiafinance.blogspot.com/2010/01/dow-jones-newswires-report-on-notion.html

The full FY2009 (ended Sep 09) earnings per share amounted to 25.6 sen per share based on the consolidated 140.7 million shares of 50 sen each. The results were above the last earnings per share guidance. OSK projected that its 2010 net figure would jump to RM52.8m or a net EPS of 37.5 sen.

At a share price of RM3.30, that works out to be a quite ridiculous 8.8x PER for 2010 for a company that is showing double digit EPS growth trend. Why is that ridiculous, you might ask. One, the emergence of Nikon (if the news is correct) as a 10% shareholder will boost its image and secure its future order flows. Needless to say, the main reasons why Notion Vtec was picked by Nikon were their strategy, execution ability and relevance in moving up the value-chain. Their expansion into Thailand (funded by the share placement) fits in nicely with Nikon's plan.

Would the move alienate Notion's other clients? Most probably not, as there is no hint of a board seat for the new substantial shareholder. Moreover, Notion Vtec's attraction is their ability to deliver, and that is paramount to any clients.

Notion Vtec Bhd is the country's leading listed maker of precision components for hard-disk drives (HDDs), and have started making 2.5" HDD components for South Korea's Samsung Co. Notion will initially make up to 500,000 pieces a month for Samsung with an average selling price estimated at RM4 a piece, and the volume can go up to one million pieces per month by mid-2010. The qualification to produce for Samsung could be a significant earnings kicker going forward. Samsung is the world's largest maker of liquid crystal displays, would fit in nicely with Notion's existing customer base.

Notion's biggest cutomers by revenue contribution are Western Digital Corp,the world's second largest maker of HDDs; Hitachi Ltd, Japan's third largest manufacturer; and Nikon Corp, the world's second biggest camera maker. Currently, some 80 per cent of Notion's sales comes from the from the HDD and digital camera industries, while the remaining 20 per cent is derived from the industrial segment, particularly from electronic braking systems for the automotive industry.

Now that it has breached the RM3.30 mark, could there be further upside from here? The key is the 8.8x 2010 PER. Notion Vtec is being bought up by smart fund mangers even at present levels. If you do not do your homework, you would have just had a nice profitable trade and will probably miss out on the fat. Remember 3A! Of course I am not saying this is another 3A, but its going to look a lot like it because of one major factor - JCY HDD.

What is JCY HDD? .... JCY HDD is a wholly owned unit of JCY International. The group is one of the world’s largest HDD components manufacturers, with manufacturing operations in Malaysia (Johor and Penang), Thailand and China. The JCY group reported a revenue of RM1.76 billion and net profit after tax of RM207 million for the financial year ended Sept 30, 2009. The submission of JCY’s listing draft prospectus confirmed The Edge’s report that the HDD components maker was seeking to list on Bursa Malaysia and had appointed CIMB IB and UBS AG to work on its initial public offering. Both CIMB IB and UBS AG are also lead arrangers on extending the term loan to JCY HDD. According to a source familiar with the matter, the IPO exercise valued JCY at RM4 billion in terms of total market capitalisation - the next biggest IPO in recent times after Maxis.

As news of the pricing of JCY HDD began to flow out, it is apparently going to be around 14x earnings. If you put JCY HDD next to Notion, even though the former is bigger, Notion Vtec will win on many factors. Notion will have a lot more room for growth than JCY HDD owing to their relative size. Notion has Nikon, and seriously, Notion's production structure is more geared towards the cutting edge of technology. Notion is producing HDD for a few of the top rung global players. They are supplying digital cameras and LCDs for Nikon and Samsung, the two market leaders in their fields - these two sub sectors are the real growth sectors in HDDs, need I say more. JCY lags behind in terms of margin profitability, ROE and track record even.

Many smart funds are willing to accumulate Notion Vtec to at least revalue it closer to JCY HDD's 14x pricing.... and that's assuming JCY HDD does not perform very well on trading, if JCY performs well, that will only drag Notion Vtec along as it is in its slipstream. Even if you take a 12x PER for 2010, Notion Vtec is well supported at RM4.50.

Why the disparity? Its not that JCY is overvalued but rather its only in recent times that Notion Vtec has been on the radar, and that the latter is grossly undervalued. Now that there is JCY HDD in the frame, Notion looks like a princess, before, Notion was pretty but alone in the forest, now Notion has come to the city and shines brilliantly next to anyone.

After the consolidation there is just 140.7m shares. Which way will you be leaning to?

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

p/s photos: Lin Chiling

Dow Jones Newswires Report On Notion Vtec

Latest news flow on Notion Vtec and potential buyer. I googled it as a friend said it was in the news, and got the news from Italian bourse news flow... lol.

MF Dow Jones Market Report

Nikon: acquisira' quota 10% in Notion Vtec per 36,7 mln myr

KUALA LUMPUR (MF-DJ)--La societa' giapponese Nikon acquisira' la quota del 10% nella societa' malese Notion Vtec per 36,7 mln myr attraverso un collocamento azionario riservato. Lo riferisce una fonte vicina alla vicenda.

"Le due parti stanno limando gli ultimi dettagli e dovrebbero annunciare la chiusura dell'accordo entro pochi giorni", ha rivelato la fonte.

Nikon, il colosso che produce fotocamere digitali e strumenti di precisione, acquisira' 13,8 mln di azioni di Notion.

Notion, quotata sulla borsa malese dal 2005, e' una societa' che produce componenti per hard disk, fotocamere monolente e dispositivi elettronici per automobili. red/est/car

(END) Dow Jones Newswires

January 11, 2010 03:45 ET (08:45 GMT)

Copyright (c) 2010 MF-Dow Jones News Srl.

Anyway, I clicked "translate" and the English version appears side by side ...lol. Hmm... really would like to speak to the guy now who came to my talk from Notion ... lol.. .

MF Dow Jones Market Report

Nikon: acquisira' quota 10% in Notion Vtec per 36,7 mln myr Nikon: will acquire 'share 10% to 36.7 mln Notion Vtec myr

KUALA LUMPUR (Dow Jones) - The company 'Japanese Nikon will acquire' the level of 10% in the company 'Malay Notion Vtec for MYR 36.7 million through a private share placements. Lo riferisce una fonte vicina alla vicenda. It refers to a source familiar with the matter.

"Le due parti stanno limando gli ultimi dettagli e dovrebbero annunciare la chiusura dell'accordo entro pochi giorni", ha rivelato la fonte. "The two sides are filing the final details and should announce the closing of the agreement within a few days," revealed the source.

Nikon, il colosso che produce fotocamere digitali e strumenti di precisione, acquisira' 13,8 mln di azioni di Notion. Nikon, the giant that produces digital cameras and precision instruments, will acquire '13.8 million shares of Notion.

Notion, quotata sulla borsa malese dal 2005, e' una societa' che produce componenti per hard disk, fotocamere monolente e dispositivi elettronici per automobili. Notion, listed on the Malaysian stock exchange since 2005, and 'a society' which produces components for hard drives, cameras monolente and electronic devices for automobiles. red/est/car red / east / car

p/s photo: Son Ye Jin

Further Updates On Notion Vtec & KPJ

As I have been following both shares closely, I will comment on recent developments on both companies, which are really quite interesting.

This announcement is dated 6 January 2010.
Announcement Details :

Table 1
Name of Director	Name of Registered Holder	Date of Acquisition	Purchase Price per share	Number of Ordinary Shares of RM0.50 each acquired	% of Issued Shares#
Thoo Chow Fah	Choo Wai Sook	6 January 2010	RM2.75	100,000*	0.07*

Comment: A director buying at RM2.75. Its not a significant size, but the timing is significant.

Type	:	Announcement
Subject	:	NOTION VTEC BERHAD (“NVB” or “Company”) Private placement of up to ten percent (10%) of the issued and paid-up share capital of the Company (“Private Placement”)
Contents	:	Further to our earlier announcements made on the Private Placement, HwangDBS Investment Bank Berhad, on behalf of the Board of Directors of NVB, is pleased to announce that the Company has on 6 January 2010 fixed the issue price for the new 13,844,694 ordinary shares of RM0.50 each in NVB (“NVB Shares”) to be issued pursuant to the Private Placement (“Placement Shares”) at RM2.44 per Placement Share. The issue price of RM2.44 per Placement Share represents a discount of approximately 10% to the volume weighted average market price of NVB Shares for the five (5) market days immediately preceding 6 January 2010 of RM2.7066. Details of the placee, who is a strategic corporate investor, will be announced upon the completion of the Private Placement, which is expected to be no later than 20 January 2010. This announcement is dated 6 January 2010.

Finally, supposed to be in December, about one month late. Its whom will be taking up the placement which will be important, not the price. Please read posting on Notion Vtec back in October:

http://malaysiafinance.blogspot.com/2009/10/why-i-like-notion-vtec-tons-of.html

Type	:	Announcement
Subject	:	KPJ HEALTHCARE BERHAD (“KPJ” OR “COMPANY”) ACQUISITION BY KUMPULAN PERUBATAN (JOHOR) SDN. BHD. (“KPJSB”), A WHOLLY-OWNED SUBSIDIARY OF KPJ OF 40,800,000 ORDINARY SHARES OF RM1.00 EACH, REPRESENTING 51% EQUITY INTEREST IN SMC HEALTHCARE SDN BHD (“SMCH”) FROM SABAH MEDICAL CENTRE SDN BHD (“SMC”) FOR A CASH CONSIDERATION OF RM51,000,000 (“PROPOSED ACQUISITION”)
Contents	:	The Board of Directors of KPJ (“Board”) wishes to announce that KPJSB, which is a wholly-owned subsidiary of KPJ, had on 6 January 2010 entered into the following agreements:- (a) a conditional Share Sale Agreement (“SSA”) with SMC for the acquisition of 40,800,000 ordinary shares of RM1.00 each (“Sale Shares”) which is equivalent to 51% of equity interest in SMCH from SMC for a cash consideration of RM51,000,000 (“Purchase Consideration”); (b) Shareholders Agreement with SMC to regulate their relationship as shareholders of SMCH; and (c) Management Agreement with SMCH for the appointment of KPJ to manage the existing private and the new private hospitals of SMCH. The details of the announcement are as per attached. This announcement is dated 6 January 2010.

Comment: Very interesting announcement during the share split and ex period for bonus and free warrants. How significant is the acquisition. Well, industry insiders will tell you that there were a lot of bidders for SMCH, and for KPJ to even get 51% is nothing short of a coup. 51% for RM51m, have you tried building a hospital now for less than RM150m??? ... thats why its a coup.


p/s photos: Fiona Xie

Why I Like Notion VTec (Tons Of Catalysts, Another 3A?)

There are very few companies that can map out growth and expansion strategies properly, particularly if you manufacturing in precision engineering. You need to deliver, be consistent, be a critical part of the supply chain, and deliver well and on time. Then you need to manage your cost well and hope to reach critical mass in whatever you are producing. Track record alone will ensure more business from the big players. The big guys will always want to whittle down their main suppliers, and they need to feel comfortable that they are reliable and can deliver (again).

Just like Success Transformers, Hai-O and Efficient e-Solutions, Notion Vtec has also made the Forbes Asia "Best Under A Billion" list. The list featured the best 200 companies from the 24,155 listed companies in the Asia-Pacific region.

Over the last 2 weeks Notion V Tec has had a strong run up. Is it just participating in the "me-too" smaller caps rally, or is there something more substantial. Notion VTec is one of biggest high precision engineering specialists in Malaysia with 2 manufacturing plants in Klang, Selangor, which it has expanded a few times since its IPO in 2005. Presently, it has about 1,300 employees, and 80% of its factory workers are foreigners. The company has 960 CNC machines at the 2 production facilities. It has obtained ISO 9001: 2000, ISO140001: 2004 and ISO / TS16949 certification.

Notion VTec derives the bulk of its revenue from the hard disk drives (HDD) and digital camera industries. Its key customers are MNCs such as Western Digital, Hitachi and Nikon. Its key products camera cam barrels, digital camera body lens ring, HDD anti-disk, HDD disk clamps, HDD spacer rings and so on (refer to Appendix I for details on key products). Other industries with a lower sales contribution are the automotive, consumer electronics and air conditioning sectors.

Its top customers are the biggest players in the HDD and digital camera industries the likes of Western Digital, Hitachi and Nikon, as such, Notion VTec’s business will be reflective of the performance of the two industries. HDD division (44% of group’s revenue) is seeing continuous strong demand from its key customer namely Western Digital. Demand for storage has been very firm on the back of rising digitalization. Compare that to Seagate which is still mired the problems associated with the acquisition of Maxtor.

Camera (46% of group’s revenue) is also seeing uptick in demand. As price points moved lower (for the SLRs), demand elasticity kicked in with higher volume being experience in the SLRs space. Nikon being its major customer (which commands some 40% of global SLRs) is once again loading up Notion for its quality and strong execution.

Notion VTec is in the midst of finalizing the acquisition of a production facility (23,000 sq ft) for a sum of RM5m in Thailand. The new facility will gear up to produce camera components for its key customer – Nikon beginning 1QCY2010. Plans are afoot to expand the production floor space to 100,000 eventually.

Catalyst #1 - New 2.5inch form factor: The project will involve the supply of base plates with contribution likely to hit RM4m per month (ASP USD1.25 x 1m pieces per month) or RM48m per annum on proforma. Initial ramp will be circa 100,000 per month rising to 1m eventually (tentatively by June 2010). Previously concentrating only at the 3.5inch form factor, the new client offers a golden opportunity for the group to tap into the higher growth form factor which includes notebooks and other mobile devices. The new 2.5inch project should propel group to hit revenue of RM1 billion in the near future. Using 600m units HDD per annum as a reference and 5% market share for the group, number of units will work out to be 30m pieces, that will translate into additional earnings of RM60m or 8.5sen EPS. Considering it is making just RM36m in net profits now, that is a quantum leap.

Catalyst #2 - Notion VTec has just been qualified by a new HDD customer, Samsung, to produce 2.5” HDD components. This is one factor which would propel Notion VTec to a higher growth platform in FY10 and FY11. Without this qualification, the company would only at best grow organically in tandem with the industry’s growth rate. This qualification by Samsung allows Notion VTec to mass produce 2.5” HDD components for the first time. Before this project, 90% of its HDD components is for the 3.5” HDD segment. Samsung has ordered the company to start mass production on 2.5” HDD components by November. Notion VTec is the second supplier for this particular component.

Catalyst #3 - Margins defensability: While Notion VTec’s consistently high margins of 25% since FY04 is impressive, it also stands out as being able to turn in the highest margins among its public listed peers in Malaysia. Notion VTec’s high volume products such as disk clamps, anti-disk and spacers for HDD are very profitable as each clamp and spacer only weighs 2 to 5 grams respectively, and so its material content is limited to less than 25% of its cost. By making its tools and fixtures in-house also brings down costs further. As for the digital camera segment, since the company started supplying high volumes of cam barrels to Nikon in 2007 and other digital camera makers prior to Nikon, the pricing pressure has been mitigated by the continuous introduction of new camera models, which enables Notion VTec to price its components at better levels.

Revenue 104.5m (2007); 146m (2008); 165m (estd.); 214m (2010 estd.)
Net Profit 26.6m (2007); 32.9m (2008); 36.7m (2009 estd.); 45.5m (2010 estd.)
EPS (sen) 4.5 (2007); 4.7 (2008); 5.2 (2009 estd.); 6.5 (2010 estd)
DPS (sen) 2.9 (2007); 1.4 (2008); 1.3 (2009 estd.); 2.0 (2010 estd.)

What's interesting was that the company still pays out decent dividends (considering its 703m shares issued). Herein lies the key, it is likely that the controlling shareholders want to hold onto their stakes, and as such they would probably "want" to live on the dividends. That is likely because if you look at the planned capex, its aggressive. Obviously, management is confident about their prospects. Notion VTec has budgeted for the second highest capex of RM50m for FY10 since its IPO in 2005. A sum of RM20m will be used for the Klang plant while RM30m will be spent for constructing the new Thailand plant. So far, RM20m in capex has been spent for 9MFY09 and another RM20m is expected to be spent on 103 new CNCs in 4QFY09. Hence, the total capex of RM45m for FY09 means that Notion VTec is expected to incur high capex for 3 consecutive years, at least until FY10. That to me, is a very good indicator.

Shares Issued: 703m

Major shareholders:
K.I. Permodalan Felda 15..0%
Choo Wing Hong:: 14.4%
Thoo Chow Fah: 10.9%
Choo Wing Onn: 10.6%

Revenue breakdown by key customer
FY08 / FY09e
Western Digital 30% / 36%
Hitachi 9% / 5%
Nikon 33% / 31%
PMG Klang 7% / 5%
Others 20% / 23%

Catalyst #4 - The company has just announced that they have approval to issue and place out 10% additional shares. This should be the biggest kicker. It all ties in with the capex expansion plan. While there have been whispers, I also do not want to over-speculate. Just think for a moment if the 10% is placed out to one of their top 3 clients - that will go a long way to securing long term business and gain a lot more market share of order from that client alone. The 10% if placed, say to Nikon, will not hinder its relations with other customers because its not a substantial stake, but it will elevate Notion VTec to a higher level of acceptance by other customers (if its good enough for Nikon, its good enough for me).

If its Nikon or Western Digital, could this have the same effect as Wilmar had on 3A Resources? Probably not as fantastic because the 3A situation is being transformed in its scalability by latching onto Wilmar's reach and distribution. In Notion's case, although it will be good, it will not be as exciting in terms of "scalability", but still very very good. If you note their corporate actions, they will be doing a 5 shares into one exercise, ex Nov 3 I think, that is a very good move to solidify the share base and capitalisation - hence it is likely that they will announce the placement just prior to the ex-date.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

p/s photos: Goto Maki