Notion VTec; Buy; RM0.785
Price Target: RM0.90 (Under Review); NVB MK

Notion VTec announced that it had subscribed for 975m shares in Alcyone Resources Ltd (listed on the Australian Stock Exchange) at an issue price of A$0.005/share for a total consideration of A$4.875m (RM14.7m). Upon completion of the issue (expected by mid-Nov 2013), Notion VTec would own an associate stake of 19.9% in Alcyone Resources Ltd. Alcyone Resources have also agreed to issue Notion 487.5m options (for free) with an exercise price of A$0.01, which if exercised would result in a total 27.1% equity stake in Alcyone. The company is a pure play silver producer based in Queensland, Australia.

Notion VTec’s stated rationale for the deal was to explore potential downstream and value-added activities for silver and other metals as well as improving on its current expertise with metals. We are cautious on this deal, as this would be the first time Notion is venturing into a commodity play, which is not a key focus for the group. In addition, a cursory look into Alcyone Resources Ltd’s income statement shows losses for FY13 and FY12 (June year-end). Further losses would be reflected in diluted earnings through associate income declines. However, we would attach more optimism if this could be leveraged to launch Notion into the consumer electronics or robotics industries as part of a larger plan. Maintain BUY with RM0.90 price target for now, pending Notion’s briefing to be held on 8 Oct 2013. 

Source: HwangDBS Research - 7 Oct 2013