VENTURE CORPORATION LIMITED (SGX:V03)
Venture Corporation - Time For a Positive Rerating
- Upgrade to BUY from Neutral, with a higher Target Price of SGD19.3, from SGD16.3, a 14.9% upside plus a 4% yield.
- Venture Corp reported a decent 3Q19 which, combined with lowered tensions between the US and China after the conclusion of the Phase 1 deal, make us expect Venture Corp’s ramp up projects in 4Q19 and 1Q20 to be successfully.
- We think the stock performance over the next quarters could outperform the Street’s expectations. We lift our FY19 and 20F NPAT estimates by 3% and 5% and roll over our Target Price to FY20F, based on a 15x P/E.
4Q19 likely to be better than consensus expectations.
- Venture Corp (SGX:V03) enjoyed a strong 3Q19 y-o-y mainly due to a weaker base in 3Q18. Management guided for a continuation of business and geopolitical uncertainties. Over the next 12 months, the company will continue to support several partners in their new and key product launches.
- However, as Venture Corp enjoyed a strong 4Q18 we expect a weaker 4Q19 y-o-y due to the current headwinds in the macro environment and continued uncertainties resulting from the trade war.
- However, the performance in 4Q19 should still be above Street’s expectations (we expect 4Q19 NPAT at c.SGD90m) especially since some of the company’s key customers have already reported positive results.
Long-term strategy still intact.
- Venture Corp will focus on enhancing its globally-linked clusters of excellence. It aims to develop several dynamic ecosystems, as well as serve new markets in selected technology domains in the years ahead.
- Management believes this will broaden its value creation along multiple pathways to chart future growth. It is also looking to focus on working with customers over the long term, rather than on an ad hoc basis.
- See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.
FY19F dividend of SGD0.70 likely to be maintained implying an yield of at least 4.2%.
- Last year, management declared a total DPS of SGD0.70; if management maintains the same amount for FY19F it would mean a 55% payout.
- Key risks are slowing economic growth and the worsening of the US-China war.
Jarick Seet
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-02-24
SGX Stock
Analyst Report
19.30
UP
16.300
