Venture Corporation - CIMB Research 2017-02-24: Executing well

Venture Corporation - CIMB Research 2017-02-24: Executing well VENTURE CORPORATION LIMITED V03.SI

Venture Corporation - Executing well

  • 4Q16 in line; revenue growth driven by Test & Measurement/Others segment.
  • Venture remains in a net cash position. DPS of S$0.50 was declared for FY16. The company is conserving cash for possible opportunities.
  • One-off items in FY16 include FX gains (S$6.1m), impairment loss on available for sale investments (S$5.9m) and accrual for a legal settlement (S$26.3m).
  • Our target price is raised to S$11.50, still based on 14.4x (10-year historical average) CY18F EPS.



Strong 4Q excluding one-off items 

  • 4Q16 core earnings were in line with expectations as Venture continued to execute well with customers. 
  • The star performer was the Test & Measurement/Others segment which grew 37% yoy in FY16. This segment’s contribution to overall revenue hit a new high of 47%. 
  • Reported profit rose 17% yoy in FY16. Excluding one-off items, yoy net profit growth would have been 41%. FY16 net profit was in line at 104% of our full-year forecast.


Balance sheet remains strong 

  • As at end-FY16, Venture’s net cash position was S$407m or S$1.46 per share (~14% of market cap). 
  • Dividend per share was maintained at S$0.50 for FY16 as the company is conserving cash given possible uncertainties in the global economy. 
  • We opine that cash is also being conserved for possible M&A opportunities.


Outlook 

  • Venture guided that the industry is undergoing rapid change and transformation in a dynamic, highly competitive and globalised world. The group’s strategy is to strengthen its Clusters of Excellence and deepen its partnerships for value creation with leaders in technology domains of interests. 
  • Management said that Venture will continue to forge new complementary and collaborative alliances. 


Maintain Add 

  • We raise our target price to S$11.50, still based on 14.4x FY18 P/E (10-year average).
  • We raise our sales growth forecasts for the Test & Measurement/Others segment, leading to 3-5% increase in FY17-18F core EPS forecasts. 
  • Maintain Add. 
  • We continue to expect DPS of S$0.50 (4.8% yield) in FY17F-FY20F. 
  • A re-rating catalyst is stronger than expected business momentum with customers while downside risk comes from order pull back by customers.




William TNG CFA CIMB Research | http://research.itradecimb.com/ 2017-02-24
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 11.50 Up 10.940





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