Notion VTec ventures into smartphones with launch of 'Trendi' in May

KLANG: After its failed venture into the silver mining business, loss-making precision parts manufacturer Notion VTec Bhd is diving into the mobile phone business with the launch of its smartphone brand "Trendi" in May this year.
Speaking to reporters after the company's AGM here yesterday, chairman Thoo Chow Fah said the smartphone business, in collaboration with a Chinese manufacturer, will provide a new income stream for the group.
"Some of our segments are maturing, (becoming) more competitive and slimmer margins, so we need to move on to other businesses that can give us more revenue," he noted.
Declining to name the Chinese company, he said, the smartphone will be assembled in China while Notion will be responsible for the marketing and supply.
"We're not looking to be a Xiaomi (the world's third largest smartphone vendor), even if we can garner 0.1% market share, it's substantial for our bottomline and topline," Thoo stressed.
The new smartphone, which is priced below RM500, will only be sold online and is targeted at the Malaysian and regional markets. At the initial stage, he said the group is looking to sell 1,000 units, with a sales target of 50,000 to 100,000 annually.
He added that the group will also be launching more new models which are designed specifically for kids and ladies.
The group has budgeted up to RM2 million for the development of the smartphone business, which will be funded internally.
Notion Vtec is principally involved in the manufacturing of precision parts, mainly for the hard disk drive (HDD), camera and automotive segments.
Notion's bid to tap into the smartphone market came just after the failure of its investment in silver mining, which he acknowledged was "not a good decision".
The group had in October 2013 acquired a 19.9% stake in Australia-listed Alcyone Resources Ltd for RM14.7 million to diversify its business into the silver mining.
However, Alcyone's financials have deteriorated less than a year after the investment was made and was subsequently put under a receivership by one of its note holders.
The exit from the mining business resulted in Notion making a total impairment of RM15 million to RM16 million, which was also the main reason for the RM27.74 million net loss it incurred for the financial year ended Sept 30, 2014 (FY14) against a net profit of RM20.09 million a year ago.
Worth noting is that this was Notion's first full-year loss since its listing in 2005.
However, Thoo believes the group can return to the black in FY16, with FY15 seen as a transition year.
"I think for FY15, we'll still see a smaller loss compared with last year," he noted.
For the first quarter ended Dec 31, 2014, Notion reported a narrowed net loss of RM5.25 million versus RM10.02 million in the previous corresponding period.
He pointed out export-oriented Notion could have gained more if it were not due to the forward hedge at lower rates, which will expire in the next few months.
Thoo, who opined that the US dollar will remain bullish, expects higher revenue in FY15 on the back of the favourable foreign exchange rate.
Operationally, he said there have been increased orders for the HDD segment, in particular from its Thailand operations with a surge of two to threefold.