Venture Corp - OCBC Investment 2015-11-09: Steady, as it grows

VENTURE CORPORATION LIMITED V03.SI

Venture Corp: Steady, as it grows

 12.2% YoY growth in 3Q15 PATMI

 Broad-based revenue growth

 Raise FV to S$9.00; BUY

Venture Corporation Limited (VMS) reported a set of in-line 3Q15 results as revenue recorded a solid 15.7% YoY increase to S$692.9m, with growth across all its segments except for Printing & Imaging (P&I).
Revenue growth was driven by market share gain among existing customers, contributions from new customers and favourable forex movement. About 55% of the 15.7% YoY growth in 3Q15 revenue was due to forex movement, while 45% was due to volume growth.

3Q15 PATMI rose 12.2% YoY to S$40.5m but saw its net margin declined 0.1 ppt to 5.5% as tax expense jumped 56.2% to S$7.5m due to changes in sales mix towards products that do not enjoy as much tax incentives.
With the strategy of providing value-adding services to its customers, VMS’ 3Q15 PBT margin rose 0.1 ppt YoY to 6.9%.

3Q15 saw steady YoY growth across all the business segments of VMS with the exception of P&I segment (-10.7%), as expected.
We believe this growth trend is likely to continue with VMS’ Test & Measurement, Medical & Life Science and Other segment (3Q15: +29.1% YoY) in the front seat driving growth ahead.
We expect its life science segment to see higher contributions as VMS engage more in the product design phase with them. Margins in this segment are likely to be higher with more value-adding services.
While no large upswing is expected, we believe VMS will be able to sustain steady revenue growth and possibly better gross (more value-creation work) and PBT margins (cost management, productivity gains and improving efficiency) going forward. Venture’s diversified customer base is a key positive factor to ensure income stability, especially with the uncertain macro-environment outlook.

With a set of in-line 3Q15 results, we opt to keep our forecasts unchanged and believe it is on track to meet our FY16 PATMI forecasts.
Rolling forward to 15x FY16F PER, our FV increases from S$8.62 to S$9.00. Reiterate BUY, supported by a solid FY15F dividend yield of 6.0%.

Eugene Chua OCBC Securities | http://www.ocbcresearch.com/ 2015-11-09

OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 9.00 Up 8.62