Notion - 10th AGM Take away message.

On the 20th March, Notion vtec held its 10th AGM at the Premiere Hotel Bukit Tinggi Klang. together with few other share holders, I attended and posted some question to the board

Not many attended, but the executive Chairman did took some time to answer question posted. Personally, I think Mr.Thoo the Executive Chairman has replied openly, professionally and to his capability. Certainly there were things not completely revealed, yet questions were replied at length. The overall sentiment is understandably subdued due to the poor result for FY2103. The only press came to cover is The Edge malaysia.

Some important point I took away were:

1. Alcyone

• The Chairman admitted it was a investment mistake. He would resign from the board if  Notion losses (e.g: has to write down) the entire investment of RM15million in Alcyone.
• However, in a informal conversation, he is confident that Notion will be able at least take back the investment.
• Notion would not be investing more then the RM15 million already invested. Which means effectively, Notion will not subscribe the right issue. (Formally, Notion will subscribe the right issue but Alycyone will subscribe it back....how this works is not clear at the moment, Bottom line, no more capital injection from Notion.)
• There is severe drought at the mines, so mining works has been affected.

2. Sell and lease back of Factory.

• The tender process is expected to end at the end of March. (According to the financial controller during informal conversation, tenders were from consortium and high net worth individual. None from public listed companies REITS etc.)
• Mr.Thoo, mention the exercise will be "very rewarding" in a very cheeky way. Does this mean special dividend on the way? He did mention, some of the building were bought at RM25 psf, currently it is RM75 psf.
• Mr.Thoo also revealed, proceeds from the exercise, 2 years of rental will be kept as reserves, remaining to be used for capex. If they don't find anything to invest/use of the money they "might" return it to share holders.

3.Manufacturing activity

• SLR segment orders are till weak. HDD enterprise has picked up. Aumotive is growing.
• About 100 CNC machine from the SLR segment is converted to the HDD segment which is running at full capacity. SLR is running at 50%.
• Informally, management reveal Q2 will be better then Q1. SLR is expected to recover in 2015

Summary

2014 will still be a poor year with slight improvement. The Alcyone story will be complicated and affect sentiment.  Impact to bottom line will be minimal. Strengthening of the USD will still impact negatively  on the bottom line due to Forex hedging Notion undertook. (This is unfortunate, as USD is expected to strengthen further, as a exporter it should benefit.). The only bright spot will be the lease and sell back, special dividend might be on the way. That is a big "might".

There was a scene whereby there is a motion in the meeting agenda to reappoint Mr.Thoo back as Chairman. I would expect they already have a proxy ready to propose and second the motion as all other AGM does. There wasn't one! After every one waiting and looking around, I actually had to raised my hand and acted as proposer and another share holder acted as seconder...Mr.Thoo actually said he thought he is retiring early..Board tussle brewing? or over confident? 

Having said that, I have a sense of respect to the Executive Chairman, who is willing to openly admit his mistake and take responsibility for it. 

Happy Investing !

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