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

VENTURE CORPORATION LIMITED (SGX:V03) | SGinvestors.io VENTURE CORPORATION LIMITED (SGX:V03)

Venture Corporation - Past, Present, Future


Long-term drivers intact; maintain BUY

  • 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.



Historical customer resilience…

  • 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.


… and continued resilience so far

  • 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.


Pricing in earnings recession; FCF supports DPS

  • 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



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