Venture Corp - RHB Invest 2015-11-09: Value Creation Boosts Margins

Venture Corp - RHB Invest 2015-11-09: Value Creation Boosts Margins VENTURE CORPORATION LIMITED V03.SI 

Venture Corp - Value Creation Boosts Margins 

  • 3Q15 revenue/NPAT rose 15.7%/12.2% YoY to SGD692.9m/SGD40.6m, exceeding our estimates despite a higher 15.6% effective tax rate, driven partially by a gain in market share among existing customers, and the strengthening of the USD. 
  • Upgrade to BUY as we roll over our TP to SGD9.20 (from SGD8.03, 11.2% upside), based on 14.8x FY16 P/E. 
  • We continue to expect a strong 4Q for Venture – especially with the USD staying strong – and lift our FY15 NPAT estimate by 2.7%. 


 An excellent 3Q15. 

  • Venture reported a positive set of results, with 3Q15 revenue and NPAT rising 15.7% and 12.2% respectively on the back of a higher effective tax rate of 15.6% vs 11.7% a year ago, which was due to less government grants given. 
  • PBT actually rose more significantly by 17.4% YoY to SGD48m from SGD40.9m, driven partially by a SGD3m FX gain with the strengthening of the USD. 

 Aim to create more value per dollar of revenue. 

  • The strategy going forward for Venture will be to aim for value creation, ie more value per dollar of revenue. It will also continue to grow its market share among existing customers by being involved with more products and projects. 

 All segments growing except printing and imaging. 

  • High material content and the low selling prices of printers limits the value creation of electronics manufacturing services (EMS) players like Venture. As a result, it will be focusing less on growth in this segment as the large capex, time and effort involved does not justify the value that was created. 
  • Going forward, management will be focusing on higher-margin segments like its test & measurement and medical & life sciences divisions, which account for the largest portions of its topline. 

 Upgrade to BUY with a higher SGD9.20 TP. 

  • Due to the set of positive results driven partially by a gain in market share among existing customers, as well as USD strengthening and the SGD90m increase of inventory, which points to more robust business activities going forward, we continue to expect a strong 4Q15 for Venture and lift our FY15 and FY16 NPAT estimates by 2.7% and 8.2% respectively. 
  • We upgrade our call to BUY as we roll over our TP to SGD9.20, based on 14.8x FY16 P/E.


Jarick Seet RHB Securities | http://www.rhbinvest.com/ 2015-11-09
RHB Securities SGX Stock Analyst Report BUY Upgrade NEUTRAL 9.20 Up 8.03


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