Results Update

Notion announced its results for QE30/6/2010 recently. Its net profit dropped by 76% q-o-q or 73% y-o-y to RM3.0 million while turnover increased by 7% q-o-q or 36% y-o-y to RM61 million. The poor performance was attributable to 3 factors:

1) initial start-up cost of new projects;
2) quality issue in relation to the 2.5" baseplate (HDD component) project; &
3) weaker USD & EURO

Besides the quality issue in relation to the 2.5' baseplate project, Notion may face some problem of declining demand for HDD which was in turn due to a slump in the demand for netbooks. The latter was attributable to a shift in demand from netbooks to iPad. Notion does not expect its net margin to improve in the next quarter.


Table: Notion's last 8 quarterly results


Chart 1: Notion's last 8 quarterly results


Technical Outlook

Notion, which closed at RM1.87 at the end of today, tested its horizontal support at RM1.85 earlier. The horizontal line of RM1.85 is a strong support and it may hold steady for a while. If this level failed, then the stock may test the next two horizontal support at RM1.70 & RM1.50.


Chart 2: Notion's weekly chart as at August 9, 2010 (Source: Quickcharts)

Conclusion

Based on the drastic change of fortune in Notion, one may be better served by being more cautious & wait for the dust to settle before venturing into this stock. The two issues to look out for is the quality issue for the 2.5" baseplate project & the state of demand for HDD.