Notion VTec Denies Article Published On The Edge Financial Daily

On today's Edge Financial Daily: Notion Vtec to gear up after shelving share placement

• KUALA LUMPUR: Hard disk drive (HDD) component manufacturer Notion VTec Bhd plans to gear up after shelving a plan to place out a 10% stake in the company following the fall in its share price.
  
  Chairman and executive director Thoo Chow Fah told The Edge Financial Daily that the company is in the process of securing a bank loan of around RM80 million to finance the expansion of a new plant, after seeing its share price plunge 30% over the last two months to RM1.65 last Friday, close to its 15-month low of RM1.50 on Sept 1.
  
  For 3Q2010 ended June 30, both the group’s long- and short-term borrowings stood at RM91.32 million, while cash and bank balances stood at RM32.51 million. With shareholders’ equity of RM224.96 million, its net gearing stood at 0.26 times.
  
  Thoo expects the group’s gearing to rise to around 0.4 time when the bank facility is approved, of which he is confident because Notion has “a good credit line with the bank”.
  
  In April, Notion announced a plan to place out a 10% stake to raise RM45.9 million, to be used to buy equipment and machinery for its new 2.5-inch HDD manufacturing plant in Klang.
  
  At that time, Notion’s shares were trading at a much higher level of RM3.50.
  
  The entire new plant is to be rolled out in three phases and will cost RM150 million over two years. The plant is expected to significantly boost its current production level of baseplates.
  
  But due to unfavourable market conditions and lower demand for HDD, which have affected Notion’s share price recently, Thoo said the private placement exercise had to be cancelled.
  
  In January, the company placed out a 10% stake to Nikon Corp to raise RM33.78 million to expand its single lens reflex (SLR) camera parts manufacturing plant in Thailand.
  
  The RM150 million, 2.5-inch HDD plant is already facing setbacks with a high rejection rate of baseplates due to a steeper than expected learning curve.
  
  High rejection rates at the die casting and machining stage have been reported, resulting in delays in reaching production targets.
  It was also reported that Notion has set a turnaround deadline by next March to resolve its manufacturing issues.
  
  Thoo had said recently that the learning curve at the new plant is longer than expected.
  
  But he described these as short-term setbacks and was optimistic that the 2.5-inch baseplate project will eventually bear fruit.
  
  For 3QFY2010 ended June 30, Notion’s revenue rose 36% year-on-year (y-o-y) from RM44.71 million to RM60.81 million, while net profit fell 73% y-o-y to RM2.97 million from RM11.09 million.
  
  This was attributed to initial start-up costs such as R&D, depreciation, materials and labour, and foreign exchange movements. EPS, meanwhile, dropped from 7.88 sen to 1.92 sen.
  
  Thoo said that demand for HDD is weak at the moment, so the company is expecting lower revenue for 4QFY2010 compared with 3Q due to lower HDD orders.
  
  “We also expect minimal contribution from the 2.5-inch baseplate project as we tackle the problems of casting, machining and ED coating and getting the stator assembly into operation.
  
  The higher than anticipated rejects arising from this baseplate project are to be finalised and the loss will be taken up in 4Q.
  
  We therefore do not expect the net margins to improve in the quarter,” the company said in a statement.
  
  
  This article appeared in The Edge Financial Daily, October 4, 2010.
  

Cancellation of the private placement is a huge deal, yes?

When asked by Bursa Malaysia, Notion Vtec gives the following reply:

• We refer to the above article which appeared in The Edge Financial Daily, Home Business Section, page 4, on 4 October 2010.
  
  Referring to the statement "...Thoo said the private placement exercise had to be cancelled", we wish to clarify that Mr Thoo Chow Fah, the Executive Chairman of Notion VTec did not make such statement to The Edge Financial Daily as implied in the article.
  
  The Board of Directors of Notion VTec, after due inquiry with all the directors and major shareholders of the Company as well as all such other persons reasonably familiar with the matter, wishes to clarify that as at to-date, the proposed share placement has not been cancelled.
  
  This announcement is dated 4 October 2010.

So what's up?