Notion (RM2.76): Private placement not likely to go through

Just read a report on Notion Vtec by ECM Libra. Private placement likely will not go through possibly due to pricing issues. Thus, the company will opt for bank borrowings to fund its expansion for its new third plant in Klang. Nonetheless, the 1-for-5 free warrants will go through as planned. ECM Libra upgraded their EPS by 3-5% to take into account the aborted private placement, higher interest costs and dilution from in-the-money warrants.

This will be good for the share price as EPS will not be diluted. Shareholders will be able have a greater participation into the potential upside of the share price with the free warrants. Ex-date for the warrants will be 30 July 2010 while entitlement date is on 3 Aug 2010. Exercise price for warrants = RM2.55.

For more info, click here.

Notion Vtec (RM3.00): Proposal For Private Placement & Free Warrants

Bank Negara had recently approved Notion's proposal to undertake private placement of 10% of its total share capital and issuance of free warrants with 1 free warrant for every 5 existing shares held.

Private placement will help the company to raise about RM46mil to finance its capital expenditure for its centralized 2.5" HDD baseplate manufacturing facility in Klang, working capital and expenses for this proposal. This placement will be given to long-term institutional investors or strategic investors (I wonder who will likely be the investor. The previous one was Nikon which took up 10%. This time will it be Canon, WD or some other big names?) This strategy will be very good for the company as it could ensure continuous businesses coming from these electronic giants. This also helps Notion to raise cash without incurring interest costs. The downside could be dilution of EPS. However, the investment returns from this manufacturing facility and possible big names holding its shares could more than offset the EPS dilution. On the other hand, the proposed free warrants could enable investors to increase their participation of the company.

Both of these proposals could help the company to lower their net gearing as well. Net gearing is already low at 9% at the moment. The company could easily swing to net cash from current level.

Click here for more info.

Disclaimer: The above article does not represent an investment advisory service as no subscription or management fees are charged. The contents of the article are provided as general information only and should not be taken as investment advice or as a recommendation to buy or sell any security or financial instrument. Any investment decisions carried out based on information, analysis, or commentary provided above is solely your responsibility. You should consult your investment adviser before making any investment decisions.

Stock Holdings & Stocks Under Watch

There have been some requests from friends to inform them of my investment holdings and investments decisions I make. So, here it is. Hope this could help in some ways in your investment decisions and do feel free to provide feedback to me so that it could help improve my trades as well. Thanks.

Supermax (RM5.50):

Going to hold this for rather long-term until I see signs of negative turnaround for the glove industry such as supply glut, rising costs of energy/latexx, weakening USD and whether these factors can be passed on to customers. Supply glut might happen probably in another 2 years or more according to Stanley Thai. PER remains reasonable at 9.8x and 8.7x for 2010 and 2011 respectively, a huge discount to Top Glove which is trading at PE of 14.7x and 13.5x for 2010 and 2011 respectively. Earnings growth for 2011 is OK at 12.5%. The recent bonus shares (1 bonus share for 4 existing shares held) could further boost liquidity of the shares (They are already very liquid) as shares are cheaper with more shares in the market. Still like glove industry which is resilient and recession proof. Click here for more info.

Sunway Holdings (RM1.49):

The stock remains very cheap at PE of 7.4x and 6.4x for 2010 and 2011 respectively, which is at a huge discount of 50% as compared to its peers like Mudajaya, IJM, WCT or Gamuda. The company is poised to post record earnings this year coupled with huge project tenders of RM16bil with expected success rate of 10-15%. It is even cheaper than HSL or Naim which only concentrate in Sarawak and depend more on government projects whereas Sunway's orderbook is more diversified from Malaysia and government projects (Fear of overseas ventures being riskier???). It is also supported by project development and quarry business segments. Earnings growth at 15% in 2011 with strong orderbook of RM2.8bil which could last them comfortably for the next two years. Click here for more info.

Notion (RM3.04):

This stock is about growth, high margins and strong shareholders. PE of 9.35x and 7.3x for 2010 and 2011 respectively. Earnings growth expected to be more than 25-30% over the next 5 years (If I can recall, this figure came from the CEO himself). Nikon is a substantial shareholder of about 9%. Global electronics/semiconductor sector is thriving, driven by greater usage of digital devices. With more usage of laptops, game consoles (X-box, PS3), IPAD (more tablets coming from HP and Blackberry?), demand for HDDs continues to be strong. Click here for more info.

Latexx (RM3.49):

Smaller glove manufacturer, PE of 9.4x and 7.4x for 2010 and 2011 respectively. Earnings growth expected to be strong at 27% for 2011. Stock price is cheaper which allows investors to hold more shares. Better than Adventa for now due to Adventa's hiccups in its latest quarterly results and delay in production expansion.

Stocks under watch

1. Coastal Contracts (RM2.35): Cheap valuation and high earnings growth but looks riskier for this current market (Dependent on contracts, too narrowed to O&G sector, share trading cold, costs dependent on steel prices, reliability of subcontractors). Might consider going in again when sentiments are better and shares are more liquid/volatile. Click here for more info.

2. Eng Teknologi (RM2.55): Cheap valuation, PE around 4x (unbelievably low, wonder why?). Expansion plans? Earnings growth expected to be little. Will research more.

3. APM (RM3.90): PE still below 10x. Potential to go higher. Tan Chong, MBM, Proton have moved up after the recent selldown except for this counter.

4. Dufu (RM0.54): Nobody's playing. Shares are too cold. PE exceedingly low at less than 4x. Customers too concentrated on 3 players i.e. Western Digital, Seagate and Hitachi Global Storage. Share performance is soft like tauhu :p Click here for more info.

5. Naim (RM3.00): Beneficiary of Sarawak projects. Click here for more info.

Disclaimer: The above article does not represent an investment advisory service as no subscription or management fees are charged. The contents of the article are provided as general information only and should not be taken as investment advice or as a recommendation to buy or sell any security or financial instrument. Any investment decisions carried out based on information, analysis, or commentary provided above is solely your responsibility. You should consult your investment adviser before making any investment decisions.

Interview with Notion Vtec's Chairman, Thoo Chow Fah: Homespun Engineering Firm Makes Global Inroads

Want to understand more about Notion Vtec? An interview with the company's executive chairman, Thoo Chow Fah, was done by BFM recently on 18th May 2010 which could help us to have a deeper understanding of the company.

Click here for the interview. Enjoy!!

Booming Semiconductor Industry: Another Record High Global Chip Sales

News Report:

SIA Reports April Chip Sales Grew By 2.2. Percent Month-On-Month

Another record high sales:

Global chip sales recorded another historical high of US$23.6 billion in April 2010 without showing any signs of abating. The continuous uptrend in sales was mainly attributed to 3G wireless communications and consequent investment in infrastructure and recovery of demand from the enterprise, automotive, and industrial sectors. Asia Pacific region remained the growth driver in sales, supported by recovering demand from America. EU experienced the slowest growth in sales, likely due to its own economic problems. Having said that, EU remains a small portion of global demand at 13.1%. AsiaPac is the highest contributor to global sales at 54.5% followed by America (16.7%) and Japan (15.6%).

Outlook remains bright from higher equipment spending, scarce capacity and continued strong demand

Owing to lack of capital investments during the market downturn in 2008-09 in addition to capacity reduction, demand is outstripping supply during the economic recovery with utilization rate surging from 56% in 1Q09 to 94% in 1Q10. Consequently, we are seeing chip players around the world announcing massive capital investment plans this year to cater for the huge demand, as evidenced by announcements by chip manufacturers such as GlobalFoundries, TSMC, Samsung and Hynix on increasing capital spending by a few billion dollars to boost their capacities. This will further buoy semiconductor equipment spending. In addition, book-to-bill (semiconductor equipment) continued to stay above parity since Jul 09 which signals greater demand for semiconductor equipments and products.

With so many new products such as IPAD, Windows 7, Intel I3/I5/I7, 3G communication devices like IPhone, BBerry, Nokia and HTC coming into the market, the entire technology supply chain could benefit from this wave of new accessories. Tech research house such as Gartner is forecasting 20% growth in semiconductor sales.

Still upbeat on tech stocks:

Backed by all the above factors, outlook for tech companies remains upbeat and should benefit tech stocks like Unisem, MPI, Eng Teknologi, Notion, Dufu and JCY.

For earlier post on semiconductor, click here.

Notion Vtec (RM3.32): Still cheap, worth accumulating now

Much has been written about Notion Vtec by Salvatore Dali in his posts, so I won't repeat here again.

Notes:

• Resilient and high net margins in the range of 22%-25% since IPO in 2005
• Net profit to rise to about RM60mil in 2010 from RM36mil in 2009
• PER'09 and '10 at 12.9x and 7.8x respectively
• Nikon to hold 10% of Notion Vtec, further establishing Notion's business with Nikon and elevate Notion's branding among clients.
• Earnings growth expected to be strong from anticipated gains in market share.
• Backed by its earnings growth, high net margins, high ROE, higher reputation and Nikon as a shareholder, it has no business trading at PER'10 of 7.8x. Share price could potentially reach PER of 12-14x, breaching RM5.00 mark.
• Share base of 140.7 mil only, rather easy to nudge up the share price.
• Market Cap: RM467.2 mil
• Expected Div Yield: 3-4%, decent.

Disclaimer: The above article does not represent an investment advisory service as no subscription or management fees are charged. The contents of the article are provided as general information only and should not be taken as investment advice or as a recommendation to buy or sell any security or financial instrument. Any investment decisions carried out based on information, analysis, or commentary provided above is solely your responsibility. You should consult your investment adviser before making any investment decisions.