VENTURE CORPORATION LIMITED (SGX:V03)
Venture Corporation - Impacted By Global Lockdown; Still BUY
- With regards to the COVID-19 pandemic and countries going into lockdown, Venture Corp (SGX:V03) has been significantly impacted.
- Venture Corp's production is mainly in Malaysia, where a government-mandated Movement Control Order has been in effect. Although its Singapore and China units have resumed operations, the temporary halt in production at some of its factories compels us to cut FY20F PATMI by 13%, which leads to a lower target price.
Supply chain likely impacted.
- With the global supply chain disrupted due to the COVID-19 pandemic, Venture Corp swiftly implemented corrective action to stabilise its assured supply.
- Previously, it expected to fulfil most, if not all, orders – inclusive of any backlog in 1Q20, and starting from 2Q20. However, with a global pandemic in effect and many countries in a lockdown, the global supply chain is impacted. This will eventually negatively affect Venture Corp, unless the company takes further action.
Stronger 2H20F ahead.
- Management expects its outlook to improve in 2H20, supported by traction with new and existing partners. This will also be supported by several product introductions by existing partners across multiple technology domains like life sciences, healthcare & wellness, instrumentation & networking, and communications.
- Venture Corp also expects to gain momentum with several new partners in life sciences and genomics, as well as healthcare & wellness – and contributions from these partnerships should improve after 2020.
FY19 dividend level (SGD0.70) likely to be maintained for FY20F.
- Management declared a total DPS of SGD0.70 for FY19, implying a 56% payout of NPAT.
- Venture Corp also guided that it is looking to pay out sustainable dividends, so we expect FY20 DPS to be likely the same or higher than of FY19, resulting in a FY20F yield of at least 4.7% despite the pandemic
Still a BUY despite earnings cut.
- We cut FY20F earnings by 13%, which results in a lower Target Price of SGD16.60, pegged to 15x FY20F P/E.
- With its net cash balance sheet and decent dividend yield, we believe that Venture Corp will likely survive this crisis and come out stronger despite a temporary earnings blip in FY20F.
- Maintain BUY, as total upside (with dividends) is still more than 10%.
- See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.
- Key risks are decelerating economic growth, a worsening of the US-China trade war, and deteriorating conditions due to the COVID-19 pandemic.
- Read also report:
Jarick Seet
RHB Securities Research
|
https://www.rhbinvest.com.sg/
2020-04-15
SGX Stock
Analyst Report
16.600
DOWN
19.30
