Thursday, August 23, 2007

Notion Vtec II

Notion announced its earnings, Quarterly rpt on consolidated results for the financial period ended 30/6/2007

Have a look at this table which shows its quarterly earnings since listing.



There is a drastic drop in earnings and there was drastic erosion in its earnings margins.

The company explained in its earnings notes.

  • COMPARISON WITH PRECEDING QUARTER'S RESULTS

    The Group recorded lower revenue of RM22.23 million in the quarter under review (“Q3 2007”) as compared to RM28.28 million achieved in the previous quarter (“Q2 2007”). PBT decreased from RM10.01 million in Q2 2007 to RM2.23 million in Q3 2007. PBT margin also decreased from 35.4% in Q2 2007 to 10.0% in Q3 2007.

    The comparatively weaker performance in Q3 2007 was mainly attributed to the following:

    (a)Lower contribution from the camera components business segment due to significantly lower sales orders from the major SLR camera manufacturers. The poor performance of the camera segment was mainly attributed to high camera inventory levels experienced by the industry, which generally is the norm as seasonally the camera market tends to be soft during this time of the year.

    For Q3 2007, the Group achieved a product mix ratio (HDD: Camera: Industrial segments) of 53%: 22%: 26% compared to 54%: 29%: 17% ratio achieved in Q2 2007.

    (b)The HDD segment was also adversely affected by increased competition, resulting in its margins being squeezed coupled with lower volume orders from some of its major customers.

    (c)Impact of the strengthening Ringgit (RM) against the US Dollar (USD), particularly, for export orientated companies. Consequently, the Group suffered foreign exchange losses which arose from the difference in book RM/USD rate compared to the realized RM/USD rate.

How?

You have the lower earnings and then you have the Special Issues of Shares to consider.

2 comments:

random said...

I still consider precision parts making to have a low-ish barrier of entry.. However there is no doubt it is a lucrative business and Notion seems to be doing quite well..

Regarding the comments for the declining earnings and margin:

(a)Lower contribution from the camera components business segment due to significantly lower sales orders from the major SLR camera manufacturers. The poor performance of the camera segment was mainly attributed to high camera inventory levels experienced by the industry, which generally is the norm as seasonally the camera market tends to be soft during this time of the year.

Perhaps a quick look at peers and competitors for an industry outlook? And about the norm of being slow this time of the year, how did they do in the previous years.. Q3 06 looks OK to me

(c)Impact of the strengthening Ringgit (RM) against the US Dollar (USD), particularly, for export orientated companies. Consequently, the Group suffered foreign exchange losses which arose from the difference in book RM/USD rate compared to the realized RM/USD rate.

Is the bulk of Notion's sales export orientated? Otherwise they shouldn't be too affected.. I would expect local sales to be in Ringgit?

I think another red flag to consider would be the sudden departure of a key personnel.

Moola said...

My Dearest Random,

Quote: Is the bulk of Notion's sales export orientated? Otherwise they shouldn't be too affected.. I would expect local sales to be in Ringgit

=>

Regarding this issue. I glanced thru Alliance report and they commented the following:

PBT margin was 9.9% in 3Q07 compared to 35.3% in 1Q07 and 26.8% in 2Q06. Due to lower order demands, Notion could not benefit from economies of scale made possible from the volume production of higher margin products such as the spacer rings, disk clamps and high precision SLR components. The strengthening of Ringgit against USD also affected its bottom line. Based on our analysis, For every 1% appreciation in Ringgit, Notion will incur a loss of about RM200,000.

WOW!