dont talk abt hedges please... just common sense u will know hedge will only be offered by the banks IF the banks believe they will profit from signing the contract with you..
you want to play currency with the master of currency(the banks?) comeon... I want to sign RM5 to 1 USD hedging contract for 2 years, who will accept? (Almost sure win contract to me, you can say, but no banks will accept)
If the banks accept your hedging contract, by common sense, it's a contract that after analyzing all risks, the banks believe they will profit from it...
Also now is strong usd period. Probability for USD rising is more, than USD falling. (Pro USD reasons) 1) Fed rate hike in Dec 2) Oil price may fall if OPEC don't agree oil production cut in end Nov. 3) Bank negara lower interest rate.
Con USD reasons 1) Oil price increase...
1.5 months of forex above 4.16 for FY 2017, 1st Quarter now... (October up to now) if notion can just maintain status quo fundamentally, it's gonna be good already.
This depreciation is happening at a time when notion is totally unhedged already, but will only take effect on the Q result of (October-December 16) to be announced on ~Feb 2017..
If notion don't mess it up while just maintaining existing revenue its good enough.
But most importantly, fundamentally they need to secure new customers to replace Nikon/SLR, if they can do this with the unexpected forex environment now, it'll be a super big bonus.
4rd q result should released by next week.but i don really expect any surprise,the turning point should fall on 1st q 2017,where hedging losses totally eliminated,stronger usd started to lift margin meaningfully and depreciation charges reduced further.
Can expect 1-1.5 sen EPS... notion have a big variable in their 'other income'... this row sometimes can b -1m but sometimes can be +ve 6m.. Maybe even +9m for this q... very big swing..
Core business wise, qoq, HDD should recover 10-15%, SLR assume same sales, automotive same or +5% should b realistic figures to expect
the big variable mostly come from forex change,so should be quite positive in 4rd q since usd is stronger,but last portion of realized hedging losses(estimated at RM4-5m) and inventories write off should continue to drag bottom line,unless their are able to write back some items(like disposal of scrap metal),or improve sales performance.
by the way,based on last quarter trend,HDD segment unlikely to rebound meaningfully,the only hopes fall onto automotive division which own fair chance to achieve growth.net cash position should improve further if not mistaken.
should come out this week,but don speculate,be prudent.if result is good,then not too late to buy since next quarter will be even good as usd keep appreciate,but if result is not good,the we can buy on dip since coming results is expected to rebound.
IF, just IF they don't mess it up this Q's result (just a reasonable figure of at least 1 sen EPS) + next Q result is mostly gonna be great just from the confirmed forex exchange rates of October, up to end of November. Getting these 2 q results in a row will be explosive for notion
nice,above expectation indeed,but what make me even excited was their are going to started new plant at johor by next month(initially i though will only happen by 2nd half 2017),that is very crucial to enhance mid-to-long term growth,and further diversify into non-HDD segment.
Quite conservative TP upgrade for Notion from Kng... as expected, it needs another Q result to come in at 1.5+eps. After which, i'll be surprised if TP it not at least 60-70 cents.
They say this is from their HDD business which is very strict with the measurement/qc requirement. assuming 100m from HDD sales per year, 9.3m writeoff is about 10% of their total HDD sales d.. quite significant figure i must say.
Important thing now is 2 1) The impact of USD to notion's revenue in the 1st Q FY2017 results. We have already confirmed from OCT-NOV confirmed very good forex. And starting now DEC, it's still at 4.40+ 2) While forex may come and go... what I was really waiting for the MOST is operationally they increased their revenue and reduce idle unused machines. They took loan, invested a lot in CNC machine on SLR business expansion... and when the SLR business is gone, the excess depreciation really hit the rest of the business's margins. With the new factories (52000 sq feet in total) we could be seeing overall machine utilization at 90+% this will be a VERY VERY important milestone. And I'd really like to see how's the next Q result is gonna be. If the new customer is able to provide the sales volume, notion can then be in a position to choose to reduce HDD sales which is very hard to meet in terms of QC wise.
One thing which I don't like about notion is, i believe they're very picky in choosing their customer, and they were very slow in getting business for the unused machines. Hopefully, now that they've finally identified a customer/partner, it's going to be a win win situation for both Notion and their new customer.
At 90%++ machine utilization, the revenue and EPS will hopefully hit 2.5c++
i think is neutral if not slightly negative,since exporter are forced to convert 75% of expert earning into ringgit,capital flexibility will reduce following the new rules,but of course it will not impact NOTION's profitability since BNM still allow exporter to held 25% earning in dollar term,to hedge against any USD cost.
generally,notion will still benefited when USD appreciated.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
projecti2016
789 posts
Posted by projecti2016 > 2016-10-27 12:23 | Report Abuse
I'm waiting for 0.37 again