Venture Corp - OCBC Investment 2017-07-10: Opportune Time To Accumulate

Venture Corp - OCBC Investment 2017-07-10: Opportune Time To Accumulate VENTURE CORPORATION LIMITED V03.SI

Venture Corp - Opportune Time To Accumulate

  • Positive outlook remains intact.
  • Margins improvement to continue.
  • Stable dividend yield support.



Recent pullback presents opportunities to accumulate 

  • Having reached its 2017 high of S$13.07 on 11 May 17, Venture Corporation Ltd’s (VMS) share price has since corrected 9.7% to S$11.80 last Friday. This is in-line with the pullbacks seen in the U.S. for the technology stocks. 
  • That said, having recorded a strong start to FY17, VMS’ long-term positive outlook remains intact as we expect margins improvement to persist as its strategy of value creation for customers continues to bear fruit, coupled with continuous efforts to increase productivity. This strategy is also the reason that places VMS in a better position in terms of margins relative to its peers.


Fundamentals remain strong 

  • In our view, VMS’ fundamentals remain strong with a diversified revenue and customer base. It has close to 200 customers distributed across different industries and is manufacturing more than 5000 products. This also implies there is no significant revenue concentration risk on a single customer. 
  • VMS has been in net cash position since FY08, allowing it to maintain its annual dividends of at least S$0.50/share, even during the global financial crisis period. 
  • Looking ahead, we continue to expect VMS’ Test & Measurement/Medical & Life Science/Others (TMO) segment to drive revenue growth ahead.
  • In addition, market watcher World Semiconductor Trade Statistics (WSTS) organisation projects annual global market growth of 11.5% and 2.7% in 2017 and 2018, respectively. With a net cash position of S$399.6m (end-1Q17), there is much headroom for VMS to raise its dividend above the usual S$0.50/share, assuming no competing needs for cash (e.g. capacity expansion, M&A activities etc.) 


Reiterate BUY with S$13.00 Fair Value 

  • Supported by a strong balance sheet, stable cash flow, and steady earnings growth momentum, we reiterate BUY on VMS with an unchanged Fair Value Estimation of S$13.00. 
  • We believe the recent pullback presents opportunities for investor to accumulate, which translates to a forward dividend yield of ~4.7%.




Eugene Chua OCBC Investment | http://www.ocbcresearch.com/ 2017-07-10
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 13.000 Same 13.000



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