PETALING JAYA: The market remains cautious on Notion VTec Bhd’s new venture into the precious metals business, following its acquisition of a 20% stake in Perth-based silver producer Alcyone Resources Ltd.
RHB Research Institute analyst Chan Jit Hoong said that should Notion VTec equity-account for the 19.9% stake in Alcyone at a capital injection of RM14.7mil, it could prove negative for the company, given that the Australian firm continued to be loss-making.
“We are cautious on Notion VTec’s investment into an unrelated business in which management has no prior experience and limited opportunities for synergistic benefits,” he said.
Alcyone, Australia’s only pure silver mining company, recorded a net loss of A$10.34mil (RM31.17mil) on the back of A$20.69mil in revenue for the financial year ended June 30, 2013 (FY13).
However, Notion VTec assured investors that its investment in Alcyone would not derail its focus on being a high-precision components manufacturer, as the purchase was to take advantage of the Australian silver miner’s turnaround story and tap into the current depressed silver prices.
Executive chairman Thoo Chow Fah has said Notion VTec also could look into becoming a supplier of silver to Malaysia or even the region.
“This is still an idea, but local jewellers buy refined silver at spot prices plus 30%, meaning we could make that 30% if we were the supplier,” Thoo had told the media after an investment briefing on Tuesday.
HwangDBS Vickers Research also expressed concern, as this would be the first time Notion VTec was venturing into a commodity play, which is not a core business for the group.
“In addition, a cursory look into Alcyone’s income statement showed losses for FY13 and FY12. Further losses would be reflected in diluted earnings through associate income declines.
“However, we would attach more optimism if this could be leveraged to launch Notion VTec into the consumer electronics or robotics industries as part of a larger plan,” it said.
Notion VTec inched up half a sen yesterday to close at 79 sen.
RHB Research Institute analyst Chan Jit Hoong said that should Notion VTec equity-account for the 19.9% stake in Alcyone at a capital injection of RM14.7mil, it could prove negative for the company, given that the Australian firm continued to be loss-making.
“We are cautious on Notion VTec’s investment into an unrelated business in which management has no prior experience and limited opportunities for synergistic benefits,” he said.
Alcyone, Australia’s only pure silver mining company, recorded a net loss of A$10.34mil (RM31.17mil) on the back of A$20.69mil in revenue for the financial year ended June 30, 2013 (FY13).
However, Notion VTec assured investors that its investment in Alcyone would not derail its focus on being a high-precision components manufacturer, as the purchase was to take advantage of the Australian silver miner’s turnaround story and tap into the current depressed silver prices.
Executive chairman Thoo Chow Fah has said Notion VTec also could look into becoming a supplier of silver to Malaysia or even the region.
“This is still an idea, but local jewellers buy refined silver at spot prices plus 30%, meaning we could make that 30% if we were the supplier,” Thoo had told the media after an investment briefing on Tuesday.
HwangDBS Vickers Research also expressed concern, as this would be the first time Notion VTec was venturing into a commodity play, which is not a core business for the group.
“In addition, a cursory look into Alcyone’s income statement showed losses for FY13 and FY12. Further losses would be reflected in diluted earnings through associate income declines.
“However, we would attach more optimism if this could be leveraged to launch Notion VTec into the consumer electronics or robotics industries as part of a larger plan,” it said.
Notion VTec inched up half a sen yesterday to close at 79 sen.
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