KUALA LUMPUR: Notion VTEC Bhd
was negatively impacted by higher raw material prices and unfavourable forex translation in the fourth quarter resulting in missed earnings expectations.
Coupled with its conservative assumption on the operational deleveraging following the fire incident, Kenanga Research downgraded the counter to underperform with a lowered target price of 44 sen.
The research house said the group recorded 4Q17 core net losses of RM800,000 with narrowed the FY17 core net profit to RM11.8mil, making up only 69% of the research house's estimate.
On-year, FY17 revenue grew 18% underpinned by growth from all segments with marginal support from stronger USD. The auto segment contributed 27% higher revenue while engineered products saw 15% growth.
Meanwhile, Kenanga Research said Notion VTec was still in the process of ascertaining losses and the computation of claims from the fire and should finalise the claimed amount in a few months.
"As of to date, the group has ordered 290 CNCs and is buying a 60k sq ft factory (for RM10m) to cater for its business which were housed in Factory 1 previously.
"From our previous understanding, we believe the impact could be at least c.RM125m with breakdown being: net book value of RM23.6m for its Lot 6123 premise as well as RM100m for CNC
machines (assuming RM200k for each of the 500 damaged CNCs)."
Kenanga Research expects the gestation period to be longer than in the previous incident due to the severity of the incident, and assumes full recovery in 1QFY19.
Win a prize this Mother's Day by subscribing to our annual plan now! T&C applies.
