Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study

Monday, March 15, 2010

Notion Vtec – Moving Up the Value Chain, Outperform

New Coverage- Notion Vtec (Notion) is an integrated precision engineering specialist and tools maker.
- Notion is expected to extensively produce for Samsung 2.5’’ baseplates components with initial production of 100K units per/month rising sharply to 1m units per/month (by June) and 2m pieces per/month by end-2010 respectively. We expect this to grow significantly in FY11-12 as Notion steps-up its capability to produce higher-value components.
- Recall that Nikon acquired a 8.98% via a private placement exercise raised about RM33.8m. The proceeds will be used for its plant in Thailand with plans for further expansion. We expect Notion Nikon to further develop its expertise and technical know-how in order to service Nikon which will further improve production efficiently.
- We estimate revenue growth in FY10, FY11, and FY12 to driven mainly by: 1) stronger demand in the 2.5’’ HDD segment particularly the robust orders from Samsung; and 2) stronger contribution from its camera division given volume loading from Nikon.
- We estimate a fair value of RM 4.59 based on 10x FY11 EPS. Initiate coverage with an Outperform recommendation.

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