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Tuesday, April 11, 2017

Notion- Keep Boiling

Today a quick post because the warrant is going to be suspended from trading immediately.

Notion share price RM1.16

Why Notion?
Recommended Buy by Kenanga (Notion VTec - Expansion at Boiling Point) with target price of RM1.58, 36% upside. Look at the words "Boiling Point". I hope analysts will not use exaggerate words loosely and hope they really mean it. In July 2015 that was how I found OCK Group - Making The Next (Big) Leap by RHB. You saw the words Big? The word Leap? Up 100% after about one year.

See what the management said.
1) The demand for Auto EBS plungers will grow 30% Year-over-Year (YoY) in 2017 and again in 2018 and a new hard anodising line has been successfully installed and 50 new auto-lathe CNCs catering for the growth are being installed over Jan to May 2017 period.
2)The new Johor rented factories in Gelang Patah was set up in late 2016 to target new businesses and with a new energetic team we expect new business from a few new customers in the fasteners and engineered products, electrical consumer goods and EMS sector.
3)The Board is optimistic of more growth and earnings in the coming quarters.
4)With all our new planned projects, I am cautiously confident that for FY2017, our Group is expected to be on a much stronger
footing and will continue to be in the positive territory.

At least got some dividend and yield is about 1%, projected to grow.


Concerns?

For those who are concerned about price up already, Notion share price already up 200% from Nov 2016.
But further back, it was RM3.50 in March 2010 and keep dropping 37% to RM2.20 until April 2014. Then ex for warrant and bonus became RM1.25. Now also RM1.16, not much change from 3 years ago RM1.25.

Why the price was so low then? See what RHB said in January 2017 report, they said ........... Light at the end of the tunnel. Notion VTEC (Notion) was hit by a series of unfortunate events over the last five years, ie a major flood at its Thailand facility in 2012, a fire accident in its Klang production plant in 2013, losses from non-core investments in 2014, and losses suffered from its currency-related derivatives exposure in 2015 and 2016. All these are set to come to an end as it has managed to recover due to insurance claims and clean-up of its books by writing off non-core investments, as well as settling all its derivatives exposure.

Warrant is expiring, and some people may sell Notion and buy warrant to arbitrage to make few %. This will provide some pressure to the share price.

PE Ratio is 35x, very high. Agree. Part of the reason was due to provision of differed tax earlier.

Notion may not achieve the growth as per forecast. PE ratio so high, if no growth, it may not provide support to the share price.



Warrant.
Look at the warrant at RM0.125, exercise price RM1.00. Date & Time of Suspension : 13/04/2017 09:00 AM. Expiry date 02/05/2017.

For those with experience, what can we do?
Those with experience who are holding Notion, may sell Notion eg RM1.15 and buy Warrant RM0.09+RM1.00 to convert. Gain(or difference) is RM0.06.
100,000 shares = RM6000 excluding brokerage cost and other small cost.

Those with experience who already wish to buy Notion, may buy warrant and convert, rather than directly buying Notion stock.

The gap was RM0.06 to RM0.08 but now the gap is getting smaller. Based on closing, the gap is only RM0.025.

Only those with experience, I repeat that, because last day of trading is 12/04/2017 and maturity is 02/05/2017. Make one mistake, 100% total loss. Please consult your remisier/dealer even for those who are have experience.

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Cheers.

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Dollar Cost Averaging and PEGGY Method. Sharing info on cheap (low PE) company with high growth, low Gearing or Net Cash and High Dividend Yield.

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