I must admit that I made a huge mistake when I invested NOTION VTEC BERHAD, Notion (0083), at the time Notion was around RM0.67. I thought it was quite good price for me to invest in Notion (0083) due to its profitability based on past performance and good performance in its Q3 and adjusted results in Q4. Nonetheless, the ignorant of the potential negative sides of Notion caused me made this bad decision. The following content is my review and insight about Notion (0083).
In Notion Q4 report, Notion highlighted its Camera segment is facing sharply lower demand. This is the first warning signal that indicates Notion was going to achieve lower sales in its Camera segment in the coming quarter. However, I was still a little bit optimistic because Camera is just one of the three segments of Notion business. Moreover, the other segments of Hard Disk and auto/industrial segments are projected positively in the quarter. Apparently, I underestimated the impact of Camera segment to Notion's overall earning.
The claim on the Business Interruption Policy or Consequential Loss
I was expecting the claim will be realized in the Q1, unfortunately, this out-of-controlled event is also out-of-expected. In the latest quarter report, Notion just expects this claim will be finalized in March 2014.
Alcyone Resources Ltd (New Investment)
Alcyone Resources Ltd is a silver mining company that Notion has invested in last quarter. With the investment amount of only RM14.7million or only around 5.5sen per share. I simply ignored its impact to the overall performance of Notion. With Alcyone Resource Ltd's market price dropped 80%, I think the amount of "the share of loss in an Associate" will be increased in next quarter. Apparently, I did once again underestimate its impact to the Notion's market price in the short term. However, with the maximum lose of 5.5sen per share from this investment and the prospect of Silver's price to be recover, this investment, after all, should benefit Notion's shareholders in the mid-term.
Potential Good News to Notion
- A gradual improvement in 2nd half of FY14
- HDD (stable) and auto/industrial (improve) segments
- Claim on the Business Interruption
- Notion is likely to adopt an asset light manufacturing model - unlock the value of properties and increase ROA
- Using robotic arm & inline optimal inspection to reduce the impact of minimum wage by reducing the number of labors
- Camera segment will begin a fresh hope in 2015
My Point of View
Overall, I think Notion is not that bad as reflected in its market price movement. Nonetheless, I believe Notion is not going to give any good return in next 1~2 quarters. Thus, Notion is not suitable for those pursuit instant profit. Besides, with estimated negative earning in the next quarter, maybe, there will have some discount after the result of Q2 is announced.
I am quite used to cut loss once I have sufficient evidence justify the future of a business is no longer valid. For example, I did clear out all my China based listed companies last year due to some unexplainable things that I have identified.
For this case, I really do not think that it is a wise decision to sell out Notion at the price less than RM0.60. Since I only invest just small capital in Notion, let see how depth Notion will drop in the future and how worse Notion can achieve in the next quarter.
Besides, a wise investment decision should be "buy in when the worst event happens, and sell out when the best event announces". However, the question is - does the worst event happen?
That's all for today. More fascinating articles and sharing will be updated weekly in Xaivier Blog. So, you are welcome to subscribe our feed to receive our weekly updates
Written by: Xaivier Chia
P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.