Venture Corp - RHB Invest 2016-04-29: Off To a Strong Start In 2016

Venture Corp - RHB Invest 2016-04-29: Off To a Strong Start In 2016 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 | http://www.rhbinvest.com/ 2016-04-29
RHB Invest SGX Stock Analyst Report BUY Maintain BUY 9.10 Same 9.10


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