Venture Corporation - Maybank Kim Eng 2015-11-08: Entering the Growth Sweet Spot

VENTURE CORPORATION LIMITED V03.SI

Venture Corporation (VMS SP) - Entering the Growth Sweet Spot

3Q15 results in line. Strongest top line growth since 2009. Margins continued to improve as did FCF.
Aberdeen overhang removed. Institutional shareholdings now more diversified. Positive for stock performance.
Maintain BUY. Unchanged TP SGD10.70 based on 17x FY16E. Possibility of increased DPS next year given improving FCF.

3Q15 in line. Revenue rose 16% to SGD693m, the strongest quarterly growth since 2009.
NP rose 12% YoY/QoQ to SGD40.6m. 9M15 NP of SGD109m was 70% of our FY15E forecast.
Top line growth remained equally driven by value-creation and forex gains.
We estimate core revenue growth at 10%, a decent level given Venture’s size, and the fastest top line growth since turning positive in early FY14. With the latest indication that its transformation is gathering pace, Venture is entering a sweet spot for growth that should manifest itself over the next few years.
Test & Measurement/Life Sciences & Medical (36% of revenue) was the strongest performer. This is the segment with the most traction in market share gains and value-creation, with existing and new customers. We expect the momentum to be sustainable into 4Q.
The other segments performed decently, led by Industrial Products and Computer Peripherals, but off a low base for the latter.
FCF continued to improve. Following an 80% YoY rise to SGD53m in 1H15, FCF jumped 146% to SGD60m in 3Q alone on stronger operating CF.
Venture may consider raising its DPS to SGD0.55 from the SGD0.50 DPS it has paid since FY12, likely next year.
One positive catalyst is the easing of the Aberdeen overhang. It now holds only 8.9%, down from > 20% before. Venture’s shares are now in more diversified institutional hands, such as Sprucegrove (8%), Silchester (6.4%), and Bank of Montreal (c.5%).

Maintain BUY, with unchanged TP of SGD10.70 or 17x FY16 EPS, 20% premium to peers.

Gregory Yap Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-11-08

Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 10.70 Same 10.70