Venture Corporation - Phillip Securities 2019-11-11: Near-term Volatility, Long-term Intact


Venture Corporation - Near-term Volatility, Long-term Intact

  • Venture Corp’s results were largely in line with our expectations. See Venture Corp Announcements.
  • Venture Corp is gaining more customers and projects, partially due to the shift in supply chain to SEA.
  • Net margin declined to 9.8% from 10.5% a year ago from pricing pressure we expect it to continue in the near-term.
  • Downgrade to ACCUMULATE with a lower Target Price of S$17.18 (prev S$17.68). We revised our FY19e revenue upwards by 2.5% and lowered NPAT by 2.8%. We are still positive on Venture Corp for the attractive yield and rising profit share amongst its U.S. peers.

The Positives

Gaining more customers and projects.

  • VENTURE CORPORATION (SGX:V03) continues to grow its customer base. The on-going disruption in the electronics supply chain in China is benefiting Venture Corp. See Venture Corp Latest News.
  • We now know that Venture Corp serves ~130 customers globally, up from ~100. An example of a new customer would be a young technology company recently listed in the United States with a market capitalisation of ~US$6bn. Venture Corp expects new and several key products launch over the next 12mths. Anticipating these launches, we have adjusted both FY19e/FY20e revenue upwards by 2.5%.

The Negatives

Pricing pressure affecting margins.

  • Venture Corp has been undergoing pricing pressure from existing customers. Although only less than 2% of total revenue is directly impacted by the trade war, we suspect the repercussions may be slightly greater.
  • Anecdotally, we gathered that customers have been using the trade war as a reason to pressure the electronics supply chain to lower prices, even if their products are not affected by existing tariffs. We expect this trend to continue and hence expect near-term softness in net margins.
  • Venture Corp still boast an impressive profit margin of 9.8% (vs 1.5% average U.S. listed peers).


  • Venture Corp is supporting several partners in their new and key product launches and will continue to benefit from the shift in supply chain by Original Equipment Manufacturers (OEMs) to mitigate tariffs. The group expects to see traction in its entries into new technology domains and ecosystems.
  • We are still optimistic about Venture Corp’s long-term growth potential because of the healthy pipeline of projects.

Downgrade to ACCUMULATE with a lower Target Price of S$17.18 (prev S$17.68)

  • We revised our FY19e revenue upwards by 2.5% and lowered NPAT by 2.8%. Our valuation is based on a 14X PE multiple of FY19e profits. See Venture Corp Share Price; Venture Corp Target Price.
  • We like Venture Corp for its robust balance sheet, and deep value creation abilities owing to its strong R&D team.

Alvin Chia Phillip Securities Research | 2019-11-11
SGX Stock Analyst Report ACCUMULATE DOWNGRADE BUY 17.18 DOWN 17.680