VENTURE CORPORATION LIMITED (SGX:V03)
Venture Corporation - Positive Outlook Ahead; Upgrade To BUY
- Venture Corp should chart a steady recovery in 2H20, on a brighter outlook. The company is now fulfilling its backlog of orders, while its research & development laboratory plans to release some new products for the manufacturing segment in early 2021.
- On its resilience during this COVID-19 pandemic, we upgrade our call for Venture Corp to BUY and lift our Target Price, which is pegged to 19x FY21F P/E.
Trying hard to maintain margins despite lower revenues.
- Venture Corp (SGX:V03) continues to work with its customers, implementing further cost controls and improving production efficiency. ASP pressure should align its rates to match end-market demand. Meanwhile, non-essential market segments may see some pressure, given their slower rate of recovery due to COVID-19.
Production unlikely to return to high levels.
- We do not expect production to rebound to pre-pandemic levels, due to social distancing measures. Venture Corp’s main aim, for now, is to meet customer demand, and balance its orders and deliveries.
- Venture Corp’s top 10 customers now account for 45-55% of revenue, vs 50-60% previously – due to the growing diversification of customers.
Growth in several segments.
- Customers that have seen increased orders are largely from the life sciences, medical devices & equipment, networking & communications, and semiconductor-related equipment industries. Venture Corp also gained meaningful traction with new customers (in y-o-y and q-o-q terms) – which also include an existing semiconductor partner.
Improving outlook.
- We peg this stock to a higher FY21F P/E of 19x from 17x, to reflect Venture Corp’s comparatively more resilient margins and stability (over peers). This leads to a higher target price of SGD22.60.
- On rewarding shareholders, it prefers to give long-term stable and sustainable dividends. Venture Corp declared a higher interim DPS of SGD0.25, compared with SGD0.20 in 1H19. See Venture Corp Dividend History. Assuming the final dividend remains unchanged y-o-y, its FY20F dividend will likely be raised to SGD0.75 from SGD0.70, representing a 3.6% FY20F yield. We think this is highly sustainable, and investors should continue enjoying higher dividends ahead, if the company’s performance continues to improve. As such, we upgrade our call for Venture Corp to BUY.
- 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, and a worsening of the US-China trade war.
Jarick Seet
RHB Securities Research
|
https://www.rhbinvest.com.sg/
2020-10-21
SGX Stock
Analyst Report
22.60
UP
20.200
