VENTURE CORPORATION LIMITED
V03.SI
Venture Corp -Off To a Strong Start In 2016
- We maintain our estimates for Venture which, due to the challenging global economic environment, may account for a potentially slower year ahead.
- It reported a better-than-expected 1Q16, partially due to the 38.7% YoY decrease in R&D costs as customers lowered their requirements for prototyping-related tooling and services.
- Topline grew 3.6% YoY as it continued to gain market share among existing customers by being involved with more products and projects.
- Maintain BUY, with a SGD9.10 TP representing a 14% total return, inclusive of dividends.
Improving profitability.
- We make no changes to our outlook and numbers for Venture, as the global economic environment remains challenging. As such, we expect a slower year ahead for it.
- Still, strong R&D initiatives, innovation in product and solution development and sustained operational excellence have helped to widen its margins.
- In addition, a 25% YoY growth in its test & measurement segment which yields higher margins have also contributed positively to its quarterly performance.
38.7% YoY drop in R&D costs aids bottom-line, as market share grows.
- Venture reported a decrease in R&D costs, as customers lowered their requirements for prototyping-related tooling and services. This greatly boosted its profitability even while its tax rate increased from a decline in tax incentive grants given.
- PBT margins for 1Q16 improved to 6.7%, from 6.3% in 1Q15.
Risks.
- Downside risks to our call include a further slowdown in the economy.
Maintain BUY.
- With an uncertain outlook and weakening economic conditions, we maintain our estimates to account for a potentially slower year ahead.
- Maintain BUY with a SGD9.10 TP based on a 15.5x FY16F P/E, representing a 14% total return, inclusive of a SGD0.50 DPS.
Jarick Seet
RHB Invest
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http://www.rhbinvest.com/
2016-04-29
RHB Invest
SGX Stock
Analyst Report
9.10
Same
9.10
