Is Now the Time to Buy Notion VTec Berhad (KLSE:NOTION) Before the Next Growth Catalyst?

Investors evaluating Notion VTec Berhad (KLSE:NOTION) must weigh its current valuation, earnings trajectory, and the timing of its next major growth catalyst. With a market cap of MYR 310.34 million and an intrinsic value estimated at MYR 0.98-40% above its current price of MYR 0.59-the stock appears undervalued. However, recent earnings volatility and uncertainty around its Klang manufacturing expansion project demand a nuanced analysis.

Valuation: A Discount to Intrinsic Value and Industry Peers

Notion VTec's trailing price-to-earnings (P/E) ratio of 18.05 is significantly lower than the 27.6x average for its Tech/Telecom sector peers, suggesting it trades at a discount. Its forward P/E of 9.20 further implies the market is pricing in robust future earnings growth. Meanwhile, the stock's price-to-book (P/B) ratio of 0.73 indicates investors are paying less than the company's net asset value.

The intrinsic value calculation, based on the Base Case scenario, underscores this undervaluation. At MYR 0.98, the stock's potential upside is compelling, especially when compared to analyst fair value estimates of MYR 1.14. Additionally, the company's financial health-evidenced by a current ratio of 2.61 and a Debt/Equity ratio of 0.16- supports its ability to sustain operations while reinvesting in growth.

Earnings Growth Potential: A Mixed Picture

While Notion VTec reported full-year 2025 revenue of MYR 487.59 million-flat compared to the prior year- its net income plummeted to MYR 17.2 million from MYR 42.75 million. Q4 2025 results were equally concerning, with revenue declining to MYR 130.87 million and profit before tax dropping to MYR 782,000 from MYR 4.59 million in Q4 2024.

However, analysts forecast a turnaround. The company is projected to grow revenue at a 6% CAGR and earnings at 32.7% annually over the next three years. This optimism is tied to its strategic initiatives, including the acquisition of a 4-hectare land parcel in Klang for a new manufacturing facility. The project, funded by internal resources and bank borrowings, aims to boost production capacity and meet rising demand in precision engineering and PPE markets.

Risk-Aware Entry Timing: Balancing Catalysts and Uncertainty

The Klang expansion is a critical catalyst, but its timeline remains unclear. While the land acquisition was announced in early 2025, no official start date for construction or completion has been disclosed. This ambiguity introduces execution risk, as delays could prolong the realization of cost synergies and revenue growth.

On the positive side, the stock's beta of 0.83 suggests lower volatility than the market, reducing downside risk for investors. Analysts have set a 12-month average price target of MYR 0.59, with some projecting a 38.98% upside to MYR 0.82. These targets imply confidence in the company's ability to translate its expansion plans into earnings, despite near-term profit declines.

Conclusion: A Case for Strategic Entry

Notion VTec's valuation metrics and long-term growth prospects present an attractive case for investors willing to tolerate short-term volatility. The stock's 40% undervaluation relative to intrinsic value, coupled with a favorable P/E ratio compared to peers, offers a margin of safety. However, the lack of clarity around the Klang project's timeline necessitates a cautious approach. Investors should monitor upcoming quarterly reports for signs of operational progress and earnings stabilization before committing capital.

For those with a medium-term horizon, the alignment of undervaluation, sector tailwinds, and a clear growth strategy-albeit with timing risks-makes NOTION a compelling candidate for a risk-managed entry.