KUALA LUMPUR: Notion VTec's share price has fallen close to 20% over the past two days on what CIMB Research suspects to be mounting concern that its 3QFY9/10 results could disappoint.
The research house said on Wednesday, Aug 4 that the disappointment could be due to the poorer-than-expected performance and guidance of its major customer, Western Digital.
CIMB Research said it suspects that a bigger earnings dampener could emanate from higher costs for its 2.5-inch base plate manufacturing for Samsung due to high rejection rates.
'We also gather that it is unlikely to go ahead with the 10% private placement. Given the downside risk to earnings as a result of rising industry risks and cost pressure from base plate manufacturing, we are turning more cautious on the stock.
'We are likely to downgrade our OUTPERFORM call, target price of RM4.05 (20% discount to its peers or 9.3x CY11 P/E) and earnings forecasts when the 3Q results are released on Thursday,' it said.
The research house said on Wednesday, Aug 4 that the disappointment could be due to the poorer-than-expected performance and guidance of its major customer, Western Digital.
CIMB Research said it suspects that a bigger earnings dampener could emanate from higher costs for its 2.5-inch base plate manufacturing for Samsung due to high rejection rates.
'We also gather that it is unlikely to go ahead with the 10% private placement. Given the downside risk to earnings as a result of rising industry risks and cost pressure from base plate manufacturing, we are turning more cautious on the stock.
'We are likely to downgrade our OUTPERFORM call, target price of RM4.05 (20% discount to its peers or 9.3x CY11 P/E) and earnings forecasts when the 3Q results are released on Thursday,' it said.
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