THE BUZZ
After obtaining
shareholders’ approval during its EGM
on 16 April, Notion’s (i) 3-for-4
bonus issue, and (ii) 1-for-4 free warrant (Warrant-B) will go ex tomorrow.
OUR TAKE
Revision to share price and our FV. Notion is poised to
issue 115.9m new shares to its shareholders,
bringing the total number of
shares to 270.5m. As a result, the company’s
share price will be adjusted to RM1.23 from the current RM2.15 whereas, our fair
value (FV) will be revised to RM1.38 (Table 1) from the current RM2.41.
Furthermore, we do not foresee any of
its existing Warrant-A being converted into mother
shares in the short term as the warrant is deeply out-of-the-money and
hence, eliminating the possibility of an added dilution impact to its EPS
(Table 2). However, the exercise price for the newly issued Warrant-B will be
at RM1.00, which indicates an inthe-money situation. Assuming that investors
decide to convert all of their Warrants-B into mother shares, our FV would
be revised downwards from RM1.38 to RM1.24 – having
factored in the utilization of RM38.6m
in cash proceeds in offsetting Notion’s existing
debt obligations (Table 3).
Maintain TRADING BUY
recommendation with ex-bonus fair value at RM1.38. We expect its 2QFY12
financial results to be in line with our estimates as we had earlier factored
in stronger sales growth and higher average selling prices (ASPs) from its HDD segment.
Furthermore, we had gathered from
the Camera & Imaging Products
Association (CIPA) that the production recovery for digital single-lens
reflex (SLR) cameras and interchangeable (IC) lenses had accelerated and there
was pent-up demand for these goods as well. We
continue to like Notion for its diversified product base that provides a
cushion against product concentration risks. We are reaffirming our TRADING BUY
recommendation on the stock, with an ex-bonus FV of RM1.38, based on 8x CY12
PER.
Source: OSK188
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