VENTURE CORPORATION LIMITED
V03.SI
Venture Corp - Sturdy And Steady Performance Ahead
- With a better than expected 2Q16, we believe the earnings prospects are bright for Venture Corp despite a challenging outlook.
- The Test and Measurements segment saw strong growth and this trend will likely continue as the company grow existing and new customers.
- Going forward, we expect value creation and operational excellence across the Group’s entire value-chain to drive margin improvements.
- We lift our FY16F NPAT estimates by 6%, resulting in a higher DCF-based TP of SGD9.90 (from SGD9.10, 11% upside).
Moving ahead, strong and steady.
- Despite an uncertain economic outlook, Venture Corp managed to deliver a 20.3% YoY increase in NPAT in 2Q16. The higher net margin is attributed to a diversified and healthy customer base.
- We expect the company to sustain steady earnings growth despite a challenging outlook. The company’s gross and net margins are expected to expand given improving operational excellence and investments in R&D which enhances value for its clients.
Increased operational efficiencies contributed towards NPAT growth.
- Lower customers’ requirements relating to tooling and services led to a 28.7% decline in R&D expense in 2Q16, which supported NPAT expansion. Do note that the R&D expense is not a true reflection of the Group’s total R&D investments as there are some spill-over of R&D manpower costs recorded under employee benefits expense.
Risks.
- Downside risks to our call include a further slowdown in the economy.
Maintain BUY with a higher DCF-based TP of SGD9.90.
- Given better than expected 2Q16 results, we remain positive on Venture Corp and expect the company to continue its positive earnings performance.
- We have raised our FY16 NPAT estimates by 6%.
- Maintain BUY with a higher DCF-backed TP of SGD9.90, implying a 15.8x FY16F P/E.
Jarick Seet
RHB Invest
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http://www.rhbinvest.com/
2016-08-08
RHB Invest
SGX Stock
Analyst Report
9.90
Up
9.10
