Notion: Earning Dropped

Results Update

For QE31/3/2017, Notion's net profit dropped 31% q-o-q but rose 41% y-o-y to RM4.4 million while revenue rose 1% q-o-q or 21% y-o-y to RM68 million. Total revenue was flat in the current quarter under review compared to the preceding quarter. Nevertheless, Auto sector registered an increase of 9%, HDD is flat while Engineered Products is 12% negative due mainly to 34% down for Camera whereas Other Engineered Products recorded an increase of 36%. Profit after taxation was RM 4.44 million compared to RM 6.44 million in Q1FY2017 mainly due to unrealized foreign exchange losses. (Notion's latest result was announced on May 23.)

 
Table: Notion's last 8 quarterly results


Graph: Notion's last 40 quarterly results

Valuation

Notion (closed at RM1.21 last Friday) is now trading at a PER of 33 times (based on last 4 quarters' EPS of 3.7 sen). At this PER, Notion is deemed overvalued.

Technical Outlook

Notion rallied after it broke above its long-term downtrend line, RR in November 2016 at RM0.40 (see Chart 1). Right now, Notion is trapped in a flag formation, ABCD (see Chart 2). An upside breakout above RM1.38 or a downside breakout below RM1.18 would point the way forward for the stock.


Chart 1: Notion's monthly chart as at Jun 2, 2017 (Source: ShareInvestor.com)


Chart 2: Notion's daily chart as at Jun 2, 2017 (Source: ShareInvestor.com)

Conclusion

Based on weaker financial performance & demanding valuation, Notion is a stock to be avoided.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.