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.
- 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.
- 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.