VENTURE CORPORATION LIMITED (SGX:V03)
Venture Corporation - IQOS MESH To Debut Earlier
- Philip Morris International (PM US) yesterday reported 4Q19 earnings that met street expectations.
- Key positives for Venture (manufacturing partner for IQOS devices):
- Philip Morris will seek approval to sell IQOS 3 in USA, and
- launch of IQOS MESH in 3Q20.
- Reiterate HOLD for Venture Corporation (SGX:V03).
Key highlights from Philip Morris's 4Q19 results
- Philip Morris in its results announcement yesterday reiterated its guidance for HTU (Heated Tobacco Unit) shipment volume of 90bn-100bn by 2021F (2019: 60bn units). Its RRP (Reduced Risk Product) revenue hit 18.7% of FY19 group revenue (FY15: 0.2%). IQOS (I Quit Ordinary Smoking) device revenue in FY19 was US$0.7bn.
- IQOS is now available in 52 markets worldwide. Philip Morris made the product available in the markets of Hungary, Sweden, the UAE, the US and Mexico in 2019. IQOS 3 Duo (latest product) is available in all markets except USA. Philip Morris estimates that there are nearly 14m IQOS users globally.
- Philip Morris maintained good sales performance in its key Japan market with a 17.6% share of the market for HTU.
- IQOS retail stores were opened in Atlanta and Richmond. Currently, the IQOS 2.4 device is the only heat-not-burn product approved by the US Food & Drug Administration (FDA). Philip Morris plans to seek approval to market its newer version IOQS 3 device from the US FDA in the coming months. Philip Morris puts the estimated smoking population in the US at approximately 40m.
- Philip Morris will also accelerate the launch of its IQOS MESH 2.0 device to 3Q20, a market it estimates has approximately 25m adult users.
- Coronavirus outbreak: currently no impact on Philip Morris's IQOS sales but device availability may be a concern if the issue drags on as some components are sourced from China.
- Philip Morris also projected that it would gain significantly more IQOS users in 2020.
Reiterate HOLD
- We think Philip Morris gaining approval to sell IQOS 3 in the US and IQOS MESH 2.0 launch in 3Q20 should be positive developments for Venture Corp if it is involved in the production of 1QOS devices.
- See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.
- Reiterate HOLD on Venture Corp with a target price based on 12.5x P/E which is -0.5 s.d. below the 12-year forward average P/E of 15.4x. A target price scenario analysis is provide in Figure1 in attached PDF report.
- Upside risks are successful new product launches by its customers, while slower orders from customers are a key downside risk.
William TNG CFA
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-02-07
SGX Stock
Analyst Report
16.880
SAME
16.880
