Notion VTec (HOLD)

Business Continuity Plan for Thailand

'''' We left the Notion VTec's 4QFY11 results briefing feeling neutral as the positive financial results were dwarfed by the disastrous Thai flood.

'''' Besides Continental, the company has also secured a new automotive customer but the production will be postponed till May ' June 2012 due to technical issues.

'''' Management guided that 1QFY12 will most probably be loss making (in the range of low single digit of million) due to the reduced revenue and provisioning for the losses sustained during the flood in Thailand.

'''' Management expects higher cash cycle conversion days in 1QFY12 (currently stood at 158 days) attributable to the flood, but do not see any default risk as their customers are mainly cash rich MNCs.

'''' We reiterate our target price of RM1.49 based on NPV of FCF based on WACC of 12.7% and terminal growth of 10%. Maintain Hold call.