VENTURE CORPORATION LIMITED (SGX:V03)
Venture Corporation - Anticipating A Stronger 2H
- Venture Corp's 4Q19/FY19 core net profit were in line, at 26%/102% of our and consensus’ full-year forecasts. Final DPS of S$0.50 in line with our expectation.
- The company sees both risks and opportunities from the Covid-19 outbreak and is guiding for a stronger 2H20 as customers launch new products.
- Upgrade to ADD from Hold, with a higher Target Price of S$17.66, given the positive earnings guidance.
FY19 in line – positive guidance
- Venture Corp (SGX:V03)'s FY19 net profit was in line, at 102% of our/consensus forecasts. What is more notable is Venture Corp’s guidance that it anticipates a stronger 2H20, supported by traction with its new and existing partners.
- Venture Corp commented that it will be supporting new product introductions by its existing partners across multiple selected technology domains, such as life science, healthcare and wellness, instrumentation, and networking and communications.
Covid-19 outbreak is a risk …
- The risks presented by the Covid-19 outbreak are real. On the economic front, a global pandemic will eventually slow the economy or lead to a recession, with negative impact on end demand for Venture Corp’s customers’ products.
- In operational terms, the disruption to the global manufacturing supply chain due to movement restrictions in China will also lead to production bottlenecks and component shortages.
… but also presents opportunities
- Venture Corp could benefit from:
- companies seeking alternative manufacturing partners with facilities outside China to help them tide over the current situation — these additional customers or projects could provide new revenue streams for the company even after the resolution of the virus outbreak; and
- customers having an additional impetus (apart from the US-China trade war) to diversify their manufacturing locations, even if it is incrementally more expensive to do so.
Upgrade to ADD
- Given the positive guidance, we have raised our revenue forecasts over FY20-21F, leading to 0.9-4.6% increase in our earnings estimates. Our higher Target Price is still based on 12.5x FY21F EPS (0.5 s.d. below its 13-year forward average P/E of 15.4x). We upgrade our call from Hold to Add.
- See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.
- Potential re-rating catalysts include new product launches by customers.
- Downside risks include slower orders from customers and the impact from a worsening of the Covid-19 outbreak.
William TNG CFA
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-02-27
SGX Stock
Analyst Report
17.66
UP
16.880
