KUALA LUMPUR: Kenanga Research said Notion VTEC Bhd
's 1Q18 core net loss (CNL) of RM10.2mil missed expectations on operational deleveraging and higher material prices, and forecast FY18E CNL of RM22.5mil before a recovery in FY19E.
It maintained its underperform rating on the stock with an unchanged target price of 44 sen.
Kenanga Research said the CNL has been adjusted for the plant and equipment as well as investories write-off amounting to RM48.8mil as well as the insurance interim payments of RM30mil.
On year, 1Q18 revenue dropped 14% on lower sales orders following the fire incident on Oct 20, 2017 as its main Klang factory.
"Portfolio-wise, Camera products led the drop (-29%) followed by Automotive (-20%) as these products are mainly manufactured in the affected Klang factory previously."
The research firm said the group has provided for a write-off totalling about RM49mil, while putting forward a partial material loss claim of over RM150mil. It added that the final recieving amount is still uncertain at this juncture.
"In terms of business, the group had lost one account in the Camera business due to the fire incident. However, this should be partly negated by: (i) its lifestyle consumer electronics project, which should see commencement in March 2018, and (ii) new orders stream with the emergence of two new customers in the semiconductor industry for the manufacturing of precision machine parts fabricated for wire bond, with meaningful fruition to be realised only in FY19."
Kenanga Research believes that the gestation period could be longer than the six months recorded in the previous incident and assumes full recovery in 1Q19.
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