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Thursday, June 17, 2010

Notion Vtec (RM3.00): Proposal For Private Placement & Free Warrants


Bank Negara had recently approved Notion's proposal to undertake private placement of 10% of its total share capital and issuance of free warrants with 1 free warrant for every 5 existing shares held.

Private placement will help the company to raise about RM46mil to finance its capital expenditure for its centralized 2.5" HDD baseplate manufacturing facility in Klang, working capital and expenses for this proposal. This placement will be given to long-term institutional investors or strategic investors (I wonder who will likely be the investor. The previous one was Nikon which took up 10%. This time will it be Canon, WD or some other big names?) This strategy will be very good for the company as it could ensure continuous businesses coming from these electronic giants. This also helps Notion to raise cash without incurring interest costs. The downside could be dilution of EPS. However, the investment returns from this manufacturing facility and possible big names holding its shares could more than offset the EPS dilution. On the other hand, the proposed free warrants could enable investors to increase their participation of the company.

Both of these proposals could help the company to lower their net gearing as well. Net gearing is already low at 9% at the moment. The company could easily swing to net cash from current level.

Click here for more info.

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