Notion WB

OSK research report: 25 April 2012


Going ex Tomorrow

THE BUZZ 
After  obtaining shareholders’ approval during its EGM  on  16 April, Notion’s 
(i) 3-for-4 bonus issue, and 
(ii) 1-for-4 free warrant (Warrant-B) will go ex tomorrow.
OUR TAKE 
Revision to share price and our FV. Notion is poised to issue 115.9m new shares to 
its shareholders,  bringing the  total number of shares to 270.5m.  As a result, the 
company’s share price will be adjusted to RM1.23 from the current RM2.15 whereas, our 
fair value (FV) will be revised to RM1.38 (Table 1) from the current RM2.41. 
Furthermore, we do not foresee  any of  its  existing  Warrant-A being converted into  
mother shares in the short term as the warrant is deeply out-of-the-money and hence,
eliminating the possibility of an added dilution impact to its EPS (Table 2). However, the 
exercise price for the newly issued Warrant-B will be at RM1.00, which indicates an inthe-money situation. Assuming that investors decide to convert all of their Warrants-B 
into mother shares, our FV would be  revised  downwards from RM1.38 to RM1.24 –
having factored in the utilization of  RM38.6m in cash proceeds in  offsetting Notion’s 
existing debt obligations (Table 3).
Maintain TRADING BUY recommendation with ex-bonus fair value at RM1.38. We 
expect its 2QFY12 financial results to be in line with our estimates as we had earlier 
factored in stronger sales growth and higher average selling prices (ASPs) from its HDD 
segment. Furthermore, we had gathered from  the  Camera & Imaging Products 
Association (CIPA) that  the  production recovery for digital single-lens reflex (SLR) 
cameras and interchangeable (IC) lenses had accelerated and there was pent-up 
demand for these goods as well. We  continue to like Notion for its diversified product 
base that provides a cushion against product concentration risks. We are reaffirming our 
TRADING BUY recommendation on the stock, with an ex-bonus FV of RM1.38, based 
on 8x CY12 PER.