AmInvest Research Reports

Stock Idea - 13 June 2024

Publish date: Thu, 13 Jun 2024, 10:33 AM
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Company Background. Notion VTec (Notion) is a global supplier of precision-machined components based in Malaysia. It operates under 3 core business segments: (i) hard disk drive (HDD), (ii) electronic manufacturing services (EMS), and (iii) automotive. Notion specialises in high-volume manufacturing of HDD spacers and disk clamps for the enterprise segment, which supports cloud and data centre storage. Additionally, the group produces aluminum hydraulic plungers for electronic braking systems used by major manufacturers, including those catering to electric vehicle customers.

Prospects. (i) Increased orders for the HDD segment due to global inventory shortages, replenishment needs and the recovery of Notion Thailand's HDD machining business. Rising demand for large-capacity HDDs for cloud, enterprise computing and AI machine learning has also led to a resurgence in orders, (ii) The EMS segment's order surge is driven by high demand for aluminum components in high-end appliances. As a major Tier 2 vendor, Notion exports to Tier 1 contract manufacturers both locally and abroad, engaging in new projects involving high-quality metal components, and (iii) In automotive division, the group's plans to expand capacity for aluminum auto parts for braking systems, driven by demand for non-China supply chains, suggest higher sales volumes in FY25.

Financial Performance. In 1HFY24, Notion posted higher revenue of RM205.4mil (+22.2% YoY) with PAT of RM22mil (+2.9x YoY). This was mainly driven by a higher volume of sales in both HDD and EMS segments, increased sales contribution from Notion Thailand's HDD machining business and lower operating & tax expenses.

Valuation. Based on Notion’s 1HFY24 annualised net profit, the stock is trading at an attractive 2024F P/E of 19x, which is lower than Bursa Technology Index’s 31x currently. As a comparison, Dufu Technology Corp, involved in the manufacturing of hard disk drive components, trades at a much higher trailing P/E of 80x.

Technical Analysis. Notion may trend higher after it formed another positive candle and hit a new multi-year high yesterday. As the stock also broke out of a 1-week bullish flag pattern, it may see additional strength in the near term. A bullish bias may emerge above the RM1.55 level with stop-loss set at RM1.38, below the 7 Jun low. Towards the upside, near-term resistance level is seen at RM2.00, followed by RM2.20.

Source: AmInvest Research - 13 Jun 2024

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Fact sheets

1. Notion HDD 23%. 77% are Ems, Digital Camera, Face Masks and others

All time high Rm1.92

this HDD superbull might propel Notion to Rm3.00

2. Jcy. Both HDD & SSD
among world biggest for HDD/SSD covers

Will now see it go back to it's all time high near Rm2.00 and might go into uncharted territory

3. Dufu is the laggard
all time high was between Rm4.50 to Rm5.00
Should break that record and go higher

We Ai/DC in Super bull demand these 3 Stocks will morph into a Super Bull Uptrend

Best course of action
don't trade for small profits

buy and hold best

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