Notion Vtec’s cam barrel sales likely to be affected
Posted on March 27, 2011, Sunday
KUCHING: Notion Vtec Bhd’s (Notion Vtec) sales for its cam barrels could be affected by the potential slowdown in the single-lens reflex (SLR) camera and interchangeable lens market, although there has been no immediate cancellation of orders by any of its existing clients.
In its recent research report, OSK Research Sdn Bhd (OSK Research) pointed out that Notion Vtec’s cam barrel division contributed about 44 per cent of its financial year 2010 (FY10) sales at approximately RM98 million.
In the research house’s report, it had previously stated that Nikon had shut down four factories in Japan citing damages to some plants, equipment and buildings due to the recent earthquake and tsunami.
One of its affected factories was Natori, Miyagi-based Sendai Nikon Corporation, which supplied components for camera and lens production and also manufactured the high-end SLR camera body as well as body and lens mount.
“The body and lens mount are metallic mating surfaces for the lens to be attached to the camera body. Although the restoration timeline remains unknown at this juncture, we reckon it would take at least two to three months before operations resume given the magnitude of the destruction,” the research house noted.
OSK Research affirmed that as a contingency plan, Notion Vtec would be supplied with raw materials from Nikon to produce the body mount with immediate effect.
It was preparing jigs and fixtures and utilising existing computer numerical control (CNC) machines to produce these precision components.
“The finished body mount components will then be trucked to Nikon’s plant in Thailand for assembly. We understand that capital expenditure (capex) is likely to be minimal and the target annual sales is RM36 million to RM60 million per annum,” the research house added.
OSK Research reiterated its conservative stance for now as the potential slowdown in cam barrel sales had yet to be quantified.
The research house stated that the potential earnings shortfall over the medium term would be partly offset by the new orders from Nikon as well as the commencement of lens sub-assembly operation at its Thailand plant on April.
Hence, OSK Research pegged Notion Vtec’s share with the fair value of RM1.85 per share, based on seven times financial year 2011 price earnings ratio.