Year 2008 was unforgettable year for most companies worldwide as the world recession kicked in. However, there is now a growing sense of optimism that with most countries’ economies and equity markets stabilizing worldwide since March this year, the worst may be over for most companies’ earnings going forward into next year. Yet, quite a number of economists are still predicting the possibility of a double-dip recession in the US next year, which could tilt the scale back into a W-shaped recession for the world next year, one which could be worse than the one seen in 2008. While these predictions are now in the minority camp, equity investors will probably have to be mindful of these risks when selecting companies to be invested in their portfolios.
If a company can continue to register record earnings even during the worst of the global recession in 2008 and is likely to continue the streak into the next two years, it would certainly be one company that is worth a look, right? Well, under-researched Notion VTec Limited, which is now listed on Bursa’s main board since August 2008 may likely be a good bet for investors, at least in OSK Research’s view. The research house says it is impressed by the fact that the management of the company has been able to grow Notion VTec’s revenue and earnings for six consecutive years (even through the worst of the world’s recession in 2008) to 2009 and this streak is likely to continue even higher to another record-breaking year next year.
According to OSK Research, despite volatility in aluminium prices and the RM/US$ exchange rate, the company’s net profit has leapt from RM13.3 million in FY05 to an expected RM36.7 million in FY09, representing a compounded annual growth rate (CAGR) of 29%. One amazing fact is that Notion Vtec has been able to consistently maintain a profit before tax (PBT) margin of 25% since FY04, which is abnormal in the high precision engineering industry; especially for a business that makes more than RM150 million in sales.
The good news now is that with the qualification to manufacture 2.5-inch hard disk drive (HDD) components for Samsung going forward, this could likely boost the company’s earnings further in FY10 and fast-track its growth over and above its organic growth rate, says the research house.