Notion Vtec Bhd is poised to begin the first-phase operations at its largest hard disk drive (HDD) manufacturing plant in Klang by early next month, the entire development of which will cost RM150 million over the next two years.
Under a three-phase development, the new 200,000-sq ft facility will eventually have a total production capacity of 84 million 2.5-inch HDD baseplates annually, a significant boost from the current four million baseplates.
The rollout of the first phase entails production of 24 million pieces a year, with Samsung as a major client.
The first phase will be partly funded through the company’s latest proposed private placement of new shares of up to 10% of the company to institutional investors.
The placement proceeds are expected to total RM45.9 million and will be used to buy new equipment and machinery costing up to RM78 million and renovation of RM2 million. The remaining capital expenditure for the first phase and for the second and third phases will be generated from internal funds and bank borrowings.
Last January, Notion Vtec raised RM33.78 million from placing out a 10% stake to its client, Nikon Corporation, towards expanding its single lens reflex (SLR) camera parts manufacturing plant in Thailand.
Speaking after the group’s EGM here yesterday, Notion Vtec’s executive chairman Thoo Chow Fah said its current placement would not go towards another client. “We are looking at a few institutional investors to come in,” he said.
For its second quarter ended March 31, 2010 (2QFY10), the group’s revenue growth was flat at RM56.7 million versus RM56.3 million in the preceding quarter. Revenue contributions are currently derived from HDD (48%), SLR camera (36%), and industrial/automotive (16%).
2QFY10 net profit fell to RM12.2 million from RM14 million a year earlier due to the initial start-up costs of new projects in Thailand and the baseplate project, earnings from which would only come onstream in the following quarters.
For the six months to March 31, 2010, Notion Vtec’s revenue totalled RM113 million and net profit was at RM26.2 million. Year-on-year, revenue and net profit were 54% and 122% higher, respectively. The strong growth is attributed to recovery in all its business segments.
As at March 31, 2010, its long-term borrowings stood at RM52.28 million while short-term borrowings came up to RM25.9 million, while shareholders’ equity amounted to RM224.12 million, giving a gearing of 0.35 times. Cash and cash equivalents stood at RM56.85 million.
For this year’s outlook, Thoo expects strong growth from the SLR camera segment, after last year’s economic downturn.
“I see Nikon’s growth as very strong, especially coming to the end of this year,” he said, adding that the production of the new facility will have much of a positive impact on its bottom line this year, but that would be seen next year instead.
As solid state drives (SSD) are making headway towards replacing some usage of HDD, Thoo believed that HDD would have a shelf life within the next 10 years.
“As we go along, we are always aware of disruptive technologies. As for SSD, I believe there will be a complementing space for both of them. HDD is still one of the cheapest and reliable sources of storage for another 10 to 15 years. We are also moving into the 2.5” HDD as well as 3.5” HDD,” said Thoo.
The 2.5” HDD is typically used for mobile devices such as laptops while the 3.5” HDD is pervasive in personal computers.
Thoo said the group was constantly looking at cost-cutting measures. He said it was looking at recycling scrap aluminium that could serve as raw materials for its HDD baseplates. “We have found a site for it and we are now waiting for approval,” said Thoo.
Written by Aishah Mustaphah
This article appeared in The Edge Financial Daily, July 7, 2010.
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