Venture Corp - RHB Invest 2017-08-07: A Taste Of The Good Old Days

VENTURE CORPORATION LIMITED V03.SI

Venture Corp - A Taste Of The Good Old Days

Venture recorded a stellar 2Q17 performance with a record high revenue (+48.3% YoY) and explosive PATMI growth (+61% YoY), attributed by growth across all segments and the widening of its customer base.
With the continued value creation coupled with new major product launches ahead in 4Q17F, we expect this positive momentum to likely continue into 3Q17F. We expect a 20% increase in dividends this year given its stellar performance.

We revise our FY17F PATMI (+4.5%). Maintain BUY with a higher DCF-based 14.70 TP (6% upside), which implies a 17x 2017F P/E.

The last time Venture Corp (Venture) secured revenue of > SGD1bn was during 2Q07. A decade later, the group has managed to surpass that amount, recording an all-time high revenue of SGD1.013bn. This is a 48.3% increase YoY.
Increased revenue was attributed to the high receptivity of customers as products launched in previous quarters have met/exceeded the company’s expectations.
Increased revenue was recorded across all segments of the business despite the mixed results. Its customer base has also widened with new customers.

Its PBT margin in 2Q17 improved to 8.3% (1Q17: 7.6%). Going forward, we believe that Venture would likely continue to improve its margins in the remaining quarters of FY17F as shown in 2Q17. It would be through a shift in revenue mix to higher margin projects, as well as the continued strive in operational efficiencies across its value chain to lower costs.

Venture has been paying SGD0.50/share for the past few years despite a recovery in its results. However, with the superb 1H17, we think that the dividends given would likely be raised to reward shareholders if such a performance can continue.
We expect dividends for FY17F to be raised by 20% to SGD0.60, reflecting a 4.3% FY17F dividend yield.

High receptivity among customers as aforementioned was largely contributed by these segments.
Going forward, we remain positive on this segment and expect this to continue in the remaining of 2017 as the company secures demand from new and existing customers. However it is likely to be at a slower pace due to a larger base effect.

Given Venture’s exceptional performance in 1H17 despite a tough macroeconomic outlook, we remain positive on the company as it is likely to finish FY17F strong.
With the continued value creation coupled with new major product launches ahead in 4Q17F, we expect this positive momentum to likely continue into 3Q17F. As a result, we lift our FY17F PATMI by 4.5%, resulting in a higher DCF-based TP of SGD14.70, implying a FY17F P/E of SGD14.70.
Maintain BUY with a total return upside of 10.3%, inclusive of dividends.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2017-08-07

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 14.70 Up 14.100