Venture Corporation - Maybank Kim Eng 2019-09-06: Past, Present, Future

VENTURE CORPORATION LIMITED (SGX:V03)

Venture Corporation - Past, Present, Future

We remain constructive on Venture Corporation (SGX:V03)’s long-term prospects despite the current challenging operating environment, as
1. customers historically show – and continue to demonstrate - revenue resilience;
2. end-markets appear broadly stable; and
3. potential from growth markets, new products and higher allocations by customers as a result of the US-China trade war is intact.

We see room for DPS surprises, supported by strong FCF. Maintain BUY with ROE-g/COE-g Target Price of SGD18.88 (2.2x FY19E P/BV).
Risks to our view include broad customer weakness due to a US/ global recession.
See attached 15-page PDF report for complete analysis on Venture Corporation.

Venture Corporation has a broad base of 100 active customers, mostly based in the US. We compare their revenue growth with broader US manufacturing.
Historically, these customers demonstrated earnings growth even when the ISM fell y-o-y. This may be traced to the resilience and diversity of their end-markets, mainly in life sciences and 5G-related spending. Notable exceptions were GFC and the 2015 economic slowdown.

Consensus still expects Venture Corporation’s customers to deliver revenue growth in 2020E. Revenue expectations have been stable. This suggests that barring company-specific events, most end-markets are firm. Of Venture Corporation’s top 100 customers, most are still experiencing revenue growth. Venture Corporation remains on track to introduce or ramp-up new products in 3Q/4Q19.

Based on our ROE-g/COE-g analysis, we believe Venture Corporation's share price has priced in an FY18-21E earnings CAGR of -8%. We believe this to be unlikely, unless there is a full-blown recession in the US/globally.
Even if FY18- 21E earnings CAGR turns out to be -11%, implying a fair value of SGD14.00, we believe Venture Corporation’s FCF generation should still be able to fund DPS of SGD0.80 pa for a potential 5.3% yield which should mitigate total returns downside from current levels.
See attached 15-page PDF report for complete analysis.

Lai Gene Lih CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-09-06

SGX Stock Analyst Report BUY MAINTAIN BUY 18.880 SAME 18.880