Notion’s 1QFY13 core earnings of MYR2m were below our and consensus estimates. No dividends were declared this quarter. We are cutting our FY13/FY14 core earnings forecasts by 29%/27% respectively. Ascribing the same CY13 PE of 6.4x, we derive a new FV of MYR0.63. Downgrade to SELL.
Below expectations. Notion’s 1QFY13 core earnings of MYR2m were below expectations, representing only 5%/4% of our/consensus full-year estimates. During the quarter, its revenue shrank by 45% q-o-q (+24% y-o-y) as the plant of wholly-owned subsidiary, Kaiten Precision (M) SB, caught fire on New Year’s Eve. In turn, the company registered a headline loss of MYR23m after booking one-time expenses related to the unfortunate incident – management expects to claim approximately MYR50m from its insurer and also expects the damaged plant to be restored by June 2013. Overall profitability margins in 1QFY13 swung to negative territory, with EBITDA/PBT/PAT margins at -26%/-46%/-47% respectively. No dividends were declared for the quarter.
Management paints a gloomy outlook. Management expects flattish orders in 2QFY13 but projects a rising trend in 2HFY13 on the back of a modest recovery in the global economy. Furthermore, Notion added that the minimum wage ruling, which came into effect this year, will have a material impact on its bottomline – it estimates wage expenses to increase by approximately MYR6m per annum. On the other hand, capex is expected to be minimal this year. As for FY13, management expects to register lower revenue and profits as compared to FY12.
Downgrade to SELL, FV revised to MYR0.63. While the HDD outlook appears dim, its camera segment exhibits growth opportunities. The Camera & Imaging Products Association (CIPA) expects shipments for cameras with interchangeable lens (CIL) to rise by about 12% in CY13. However, with the other headwinds in mind, we are cutting our FY13/FY14 core earnings forecasts by 29%/27% as we reckon that the fire incident may have capped production, making it difficult for Notion to capitalize on any uptrend momentum in CIL demand. Ascribing the same CY13 PE of 6.4x (a 20% discount to its seven-year average forward PE of 8x), we derive a FV of MYR0.63. Downgrade to SELL.
Below expectations. Notion’s 1QFY13 core earnings of MYR2m were below expectations, representing only 5%/4% of our/consensus full-year estimates. During the quarter, its revenue shrank by 45% q-o-q (+24% y-o-y) as the plant of wholly-owned subsidiary, Kaiten Precision (M) SB, caught fire on New Year’s Eve. In turn, the company registered a headline loss of MYR23m after booking one-time expenses related to the unfortunate incident – management expects to claim approximately MYR50m from its insurer and also expects the damaged plant to be restored by June 2013. Overall profitability margins in 1QFY13 swung to negative territory, with EBITDA/PBT/PAT margins at -26%/-46%/-47% respectively. No dividends were declared for the quarter.
Management paints a gloomy outlook. Management expects flattish orders in 2QFY13 but projects a rising trend in 2HFY13 on the back of a modest recovery in the global economy. Furthermore, Notion added that the minimum wage ruling, which came into effect this year, will have a material impact on its bottomline – it estimates wage expenses to increase by approximately MYR6m per annum. On the other hand, capex is expected to be minimal this year. As for FY13, management expects to register lower revenue and profits as compared to FY12.
Downgrade to SELL, FV revised to MYR0.63. While the HDD outlook appears dim, its camera segment exhibits growth opportunities. The Camera & Imaging Products Association (CIPA) expects shipments for cameras with interchangeable lens (CIL) to rise by about 12% in CY13. However, with the other headwinds in mind, we are cutting our FY13/FY14 core earnings forecasts by 29%/27% as we reckon that the fire incident may have capped production, making it difficult for Notion to capitalize on any uptrend momentum in CIL demand. Ascribing the same CY13 PE of 6.4x (a 20% discount to its seven-year average forward PE of 8x), we derive a FV of MYR0.63. Downgrade to SELL.
Source: OSK
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