Venture Corporation - OCBC Investment 2020-11-11: Sequential Recovery


Venture Corporation - Sequential Recovery

  • Resilient 3Q20; 14% q-o-q growth in net profit.
  • Solid balance sheet with net cash position of S$830m.
  • Encouraging outlook next year.

Highlights from Venture Corp's 3Q20 Executive Summary

  • Venture Corp (SGX:V03)’s 3Q20 revenue fell 6% y-o-y to S$818.m, though this represented a sequential q-o-q improvement of 18%. This q-o-q recovery arose from Venture’s broad-based growth across its portfolios of technology domains.
  • In particular, Venture Corp noted that there was strong demand from customers in the Life Science & Genomics, Medical Devices & Equipment, Healthcare & Wellness, Networking & Communications and Semiconductor-related Equipment technology domains. This includes strong demand for its customers’ essential products and services (e.g. ventilators).
  • PBT margin was resilient at 11.3% (flat y-o-y) despite the operating landscape. Net profit for 3Q20 fell 6% y-o-y to S$80.2m, which formed ~24% of our full-year estimate, which we deem to be broadly in-line with expectations.
  • Venture Corp remains in a net cash position of S$830m.

Constructive 2021 outlook

  • Venture Corp continues well on its path of recovery, with the group expecting a stronger 2H20 compared to 1H20, assuming lockdowns and disruptions do not escalate further.
  • We note that new productions and solutions engineered and developed by Venture’s R&D labs are scheduled for release into the end-markets during 1H and 2H of 2021 by its partners and customers in several technology domains. These domains and ecosystems include Life Science & Genomics, Healthcare & Wellness, as well as COVID-19-related detection, testing, diagnostic products and solutions.
  • We understand that demand for Medical Devices & Equipment, Networking & Communications and Semiconductor-related Modules & Equipment appears to be unabated as well.
  • Looking further out into the next few years, Venture Corp notes that it will continue to strengthen and deepen its Clusters of Excellence in the USA, China and Southeast Asia. Venture believes that it will be able to expand its participation in selected technology domains and ecosystems through the diversity of its capabilities, technical skills and expertise.
  • See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.
  • Following adjustments, our fair value estimate for Venture Corp falls slightly from S$22.50 to S$22.30.

OCBC Research Team OCBC Investment Research | 2020-11-11
SGX Stock Analyst Report BUY MAINTAIN BUY 22.300 DOWN 22.500