Notion with Dyson?

I wonder how many of you notice that, a listed company's executive chairman made comments and answered questions in i3investor social forum!

That company is Notion Vtec, and it was around end of last year.

From the way he answered questions and his in-depth understanding of the company, I believe that he was no doubt an important figure in the company.

He painted a very rosy picture of Notion in the near future, with how many new & important customers secured recently, most notably Dyson.

Anyway, all his previous comments in i3investor have been removed.

What he said in the forum was almost like what was reported by The Edge earlier in Nov19 "Notion Vtec Ventures Into EMS Space".

Previously Notion was dependent on HDD & Camera parts, but now these 2 segments are expected to be stagnant & drop respectively.

The growth area is the automotive segment & the new EMS (Electronics Manufacturing Services) segment.

In its automotive segment, Notion mainly produces braking plungers for Electronic Braking System (EBS). It produces 30mil plungers annually which are fitted into one of every 6 new cars globally.

It was reported that Notion recently secured 3 new customers in this automotive segment, namely Delphi International, Hilite International & BorgWarner which should contribute to its FY2020.

For its EMS segment, it will supply metal parts to customers, not plastic parts like VS industry and SKP Resources.

Aluminium is the main raw material for Notion. So recent drop in aluminium price should benefit it.

As mentioned before, Dyson should be its main European customer in this EMS segment. Notion chairman even shared a link of Dyson's airblade 9kj hand dryer in the forum.

More interesting to investors, the management gave sales target for the next two financial years in its latest FY19Q4 quarterly report.

For the past 5 years, highest revenue achieved by Notion is RM275mil in FY2017, and FY2019's (ended Sep19) revenue stands at RM238mil.

For the upcoming FY2020, it has a target sales of RM320mil, and a whopping RM400mil for FY2021.

It also targets a PAT margin of between 7.5% to 9%. If we take a modest 8% PAT margin, PAT for FY2020 & FY2021 might be RM26mil & RM32mil respectively, with EPS 7.6sen & 9.5sen based on 336mil shares at the moment (before bonus issue).

If we give a PE ratio of 15x for a company with expected growth (currently VS 15x, SKP 20x), it will be RM1.14 & RM1.43 for the next 2 years. Current share price is at RM1.21.

Nevertheless, I think Notion still has great potential for further growth. According to its chairman, Notion has competitive edge compared to its peers, and potential customers are amazed with its new modern facility and quick response time.

As reported by The Edge, Notion has a target of achieving market capitalization of RM 1 billion by 2024. To achieve this, its share price has to be at RM3.00.

Anyway, target is just a projection or forecast. Investors need to be cautious that it might not hit its target.

Readers of this blog should be aware that I have Notion's shares. After the company started its automotive segment I have a feeling that more diversified customers might come in if it concentrates on its expertise, not doing things like selling handphones.

Recently Notion's share price has advanced more than I can hope for, probably due to its proposed 2:1 bonus issue. I think I will continue to hold and hope that its business will perform better that its forecast.