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Saturday, November 21, 2015

Notion VTec falls 11% despite improved 4Q results

KUALA LUMPUR (Nov 20): Notion VTec Bhd ( Valuation: 0.90, Fundamental: 1.15) saw its share price fell by five sen or 11.11% to 40 sen in the morning session today despite narrowing its losses in the fourth quarter ended Sept 30, 2015 (4QFY15).

As at market break, the hard disk drive (HDD) component maker's warrant B also fell by two sen or 17.39% to 9.5 sen.

Earlier today, Notion VTec announced its 4QFY15 financial results, which saw its net loss narrow by 5.47% on-year to RM10.98 million or 4.09 sen a share from RM11.62 million or 4.33 sen a share, losses were due to foreign currency hedging contracts.

Notion VTec reported derivative losses of RM15.24 million in 4QFY15, up from RM4.29 million a year ago.

Revenue for 4QFY15 rose 8.8% to RM54.78 million from RM50.37 million in 4QFY14.

For the full financial year ended Sept 30, 2015 (FY15), Notion VTec saw its net loss improved 51.34% to RM13.50 million from RM27.74 million in FY14, as revenue grew 22.9% to RM239.06 million from RM194.46 million.

The group's derivative losses totalled RM45.24 million in FY15 compared with RM302,000 in the previous financial year.

In its explanatory note to Bursa Malaysia yesterday, Notion VTec said the business environment continues to be challenging and volatile especially with the sharp rise of the US dollar, which should be good for an exporting company.

"Unfortunately, we were mostly hedged at the lower exchange rates resulting in both realised translational losses as well as forward fair valuation marked to market losses.

"The losses in FY15 were significant and wiped out the operational profits," said the group.

Going forward, Notion VTec said it will have exposure until May and September next year after which it will be totally unhedged.

"On [the] business segment for FY15, the HDD is the major contributor of 45% and the single lens reflex camera segment has declined to 28% while the auto segment is now 27%.

"(In FY16,) we do not see much change in the product mix unless there are market changes that affect it." it said.

On the cash position, the group is much stronger especially after the disposal of certain fixed assets such as Factory 2 in Klang, Selangor, for about RM18 million.

As at Sept 30, 2015, the group's cash and cash equivalent stood at RM43 million, while its borrowings including short- and long-term loans were RM37 million.

"We have spent only a moderate RM11.6 million on replacing CNCs and equipment that were beyond economical use.

"Going forward, in FY16, the board is cautiously optimistic that the financial performance of the group will be good," said Notion VTec.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)

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