Hong Leong Investment Bank (HLIB) has ceased coverage on Notion Vtec Bhd, withdrawing its previous Hold call and target price, citing internal resource reallocation and heightened macroeconomic uncertainty from the imposition of reciprocal tariffs by the US.
The move follows mounting pressures across Notion’s key business segments, particularly in electronics manufacturing services (EMS), hard disk drives (HDD), and automotive, which collectively account for the bulk of its revenue. HLIB stated that the company’s sales outlook has turned tepid, with tariff risks expected to hit earnings contributors across its portfolio.
In the EMS segment, which makes up nearly 39% of Notion’s sales, weakening consumer electronics demand is anticipated to impact its largest client. The client’s premium product offerings are seen as vulnerable to tariff-induced price shocks, potentially dampening demand. While Notion had previously projected a 25–30% uplift in EMS sales from its motor casing initiative, HLIB believes that these plans may now face delays or scale-backs under the new trade regime.
The HDD segment, contributing 27% of sales, also faces challenges as enterprise IT investment weakens amid macroeconomic headwinds. Although HDDs were recently included in the US exemption list, providing some relief, HLIB noted that cautious sentiment among data centre operators and hyperscalers could still limit procurement activity in the near term. Any scale-back in deployment by major customers such as Western Digital and Seagate could translate into lower spacer orders for Notion.
In automotive, which contributes about 24% to total revenue, the imposition of a 25% US tariff on vehicle imports is likely to dampen Notion’s sales outlook, especially with one of its key clients being EU-based and heavily reliant on the US as an export market. Compounding this, HLIB sees risk from a broader slowdown in global automotive demand and a shift in operations away from China as part of clients’ supply chain diversification strategies.
With tariffs and global economic uncertainties expected to continue pressuring demand across sectors, HLIB said it no longer considers its previous earnings projections and valuation metrics for Notion as reliable. The research house’s decision to discontinue coverage reflects a combination of internal strategy and a weaker-than-expected industry backdrop for the company.
Notion’s share price has fallen 49.6% over the past three months, closing at RM0.61 with a market capitalisation of RM321 million.
