Notion (Focus On Smartphone Components)

Precision parts market is close on clinching two or three deals from Japanese and South Korean firms to manufacture smartphone components, which could bring in rm40 million to rm50 million in annual revenue.

If successful, the deals would start contributing to the group’s bottom line from financial year ending Sept 30 2015.

The results of the deal would be known in a few weeks’ time which would see Notion expanding beyond HDD and camera component manufacturing.

It has been hit hard by the continued weakness in both its HDD and camera segments, and the outlook and for both markets remains challenging. As such, the move to manufacture smartphone components would help reverse its fortunes.

If the deals go through, regardless of which firm it ties up with, the number of manufacturing units would be huge.

The manufacturing of smartphone hardware components will involve capex, initially in the multiples of rm10 million.

For the first half financial year ended March 31 2014 the group posted a smaller net loss of rm17.38 million on continued weakness in both its HDD and camera segments. This compared with a net loss of rm20.34 million a year ago.

It expects to see a turnaround in the third quarter and remain in positive territory in the fourth quarter.

For FY2013 ended Sept 30 Notion’s net profit halved to rm21.82 million compared with rm19.26 million in the previous year. Revenue shrank to rm224.19 million.

While it deemed the HDD segment as generally quite stable, the laptop and personal computer segments of the HDD market were affected largely to the increasing demand for smartphone phones and tablet devices.

To address the erosion, it is now focusing on the enterprise segment like other HDD players as fewer people are buying laptops.

It had shifted portion of its manufacturing bilk capacity segment of the HDD market from the single lens reflex camera market. There has been a shift of manufacturing machinery to the enterprise segment from camera parts manufacturing.

Its SLR camera parts sales have plunged by 40% of its usual sales revenue.

On the oil and gas segment that delivers equipment, this unit is in the midst of a turnaround which currently (July 2014) contributes less than 5% to Notion’s net profit and revenue.

On its 20% owned associate Alcyone Res Ltd, it will keep its stake in the Australian listed firm.