Venture Corporation - Maybank Kim Eng 2020-05-10: Constructive Demand Side View Thus Far

VENTURE CORPORATION LIMITED (SGX:V03) | SGinvestors.io VENTURE CORPORATION LIMITED (SGX:V03)

Venture Corporation - Constructive Demand Side View Thus Far


Upgrade to HOLD on limited downside; still wary of risks

  • Venture Corp (SGX:V03)’s 1Q20 net profit fell 33.6% to SGD60.3m, accounting for 20% of our FY20E. While this was below typical 1Q seasonality due to Covid-19 disruptions, outlook on demand appears relatively stable thus far.
  • We raise FY20-22E EPS by 4-6% to reflect resilient than expected margins. Hence, our ROE-g/COE-g Target Price rises to SGD14.66, now on 1.6x P/B (prev: 1.5x).
  • We upgrade Venture Corp to HOLD given limited downside, but remain wary of softer than expected 2H20 demand recovery as key risk.



Venture Corp's 1Q20 impeded by supply side disruptions

  • Venture Corp's 1Q20 revenue fell 27.5% y-o-y to SGD673m due to factory lockdowns and supply chain disruptions across China, Malaysia and Singapore from government mandated movement restrictions. By end-Apr, the supply side of Venture Corp’s business has normalised without headcount or working hour constraints.
  • Venture Corp emphasises that its business are deemed “essential” products as well as services. Net margin was commendable at 9% (- 0.8ppt y-o-y).


Looking ahead at demand trends

  • Venture Corp is working with customers to scale up the demand side. Notably Venture Corp sees strengths in life science, medical and wellness, semiconductor-related equipment, networking and communications, diagnostic and research equipment and test & measurement. These should account for 60-80% of revenue, by our estimates.
  • Products used to help Covid-19 infected individuals, such as ventilators and high throughput qPCR and dPCR equipment are in strong demand.
  • On the flipside, customers from POS and industrial end-markets appear cautious to negative on outlook.


Our concerns are unchanged






Gene Lih Lai CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-05-10
SGX Stock Analyst Report HOLD UPGRADE SELL 14.66 UP 13.900



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