Notion Vtec's well diversified, RM1billion revenue target by FY2026, CAGR +43% (3x times vs RM345mil in FY2023)  

Now, investors are well aware of the increase of 3 stocks (Notion Vtec, JCY & Dufu) enjoyed investor interest & share price increase due to news driven by Western Digital & Seagate raising their pricing for new HDD orders owing to supply shortages. With raising HDD order demand over supply shortage, that signifies current HDD inventories is out of stock, increase ASP price to meet sudden ad-hoc raise of customer HDD demand due to recovery of AI cloud and new data centers.

Malaysia's ambition to become Southeast Asia's premier data center operator hub seem gaining momentum with giant MNC corporation (Nvidia and Microsoft) investing billions of dollars on data center. Next Google (with support of Malaysia government, is now exploring the potential establishment of an in-country Google data center to power digital services). This clearly show data center theme is not mere hype, more toward to a very long term investment commitment growth from Malaysia government.

Refer to The Edge interview (page 24, dated May 27th) with Mr. Thoo, Notion Vtec provide a closer view in detail. Among 3 companies, I believe Notion Vtec has more well diversified business with predictable revenue, earnings and sustainable portfolios, focus on 4 major pillars segment to boost its next revenue target to RM1billion by FY2026 (3times vs RM345mil in FY2023), CAGR 43%. Internally, Notion Vtec aims to achieve top line of RM500mil in FY2025 and double the target by FY2026.

Let's us review recent Q2'FY2024 quarter report:

• Revenue: Revenue improved by 19% QoQ and 32% YoY, mainly contributed by increase in revenue of RM8.9mil and RM6.5mil from EMS and HDD segments respectively, contributed by improved revenue across all business segments (HDD, Automotive, EMS, camera/industrial) in total.

• Profitability: Notion Vtec's gross profit reported RM23.8 mil up 10%, profit before tax up +36% from RM13.1mil to RM17.8mil and profit after tax recorded +75% up from RM8mil to RM14mil, EBITDA up 19% making continue business growth especially toward 2H'2024.

• Cashflow & Cash Level: YTD Q2'FY2024 cash balance reported quarters is +RM50.5 mil net compared to +RM25.4 mil last year.

Moving forward to 2H'24, Notion Vtec's Mr. Thoo predicted next business revenue & earnings growth estimation: 

What catalyst enablers Notion Vtec to achieve RM1billion revenue target by FY2026 (3times vs RM345mil in FY2023), CAGR 43% by segment breakdown to group revenue:

a) HDD: Revenue up 30% + high confidence continue expand 5 years due to recovery enterprise cloud & new data centers volume expansion

b) Automotive: Revenue up 35% + continue grow on new customer South Korea supply volume production of solenoid valves, starting 2HFY2024

c) EMS: Revenue up additional 35% due to few new EMS clients taken on-board in high-end electrical appliance

d) Aluminium extrusion & machining venture [New catalyst]: Revenue additional RM500mil/annual + advanced negotiation stage with potential Chinese partnership driven by need to relocate out of China operation due to US-China trade tension & US tariff hikes on Chinese imports, starting early FY2025

For FY2024, the Board is confident that it is a turnaround year, expectation is for 2H'FY2024 to out-pace 1H'FY2024