VENTURE CORPORATION LIMITED (SGX:V03)
Venture Corporation - Recovery Slower Than Expected
- Venture Corp (SGX:V03)'s 3Q20 PATMI dropped 5.9% y-o-y to S$80.2mn - 14% below our forecast.
- We had expected 3Q20 to be stronger due to orders carried over from Q2 when facilities were partially shut because of lockdown.
- Maintain NEUTRAL on Venture Corp. FY20e could be 3rd consecutive year of earnings decline since peaking in FY17. New projects are limited. We cut FY20e earnings by 12%.
The Positive
Margins stable.
- Venture Corp's PBT margin was stable y-o-y at 11.4% despite lower revenue. The was likely due to a higher mix of products in life science & genomics, medical devices and healthcare & wellness. There was strong demand for essential healthcare products such as ventilators and PCR equipment.
The Negative
Revenue weaker than our expected +12% y-o-y rise.
- We had expected a spillover of revenue from 2Q20 when factories were closed because of lockdown. It seems orders in 3Q20 were softer than expected, likely due to macro headwinds.
Outlook
- Venture Corp guided that 2H20 will be stronger than 1H20. This is to be expected since 1H20 earnings collapsed 28% y-o-y.
- Moving into 2021, we anticipate a recovery led by new products that Venture Corp mentioned would be released by customers. These will likely be in the healthcare sector, including COVID-19 related detection, testing and diagnostic products. Another driver of growth could be an improvement in macro conditions.
Maintain NEUTRAL with higher Target Price of S$18.60, from S$18.40
- We cut Venture Corp's FY20e/FY21e PATMI forecast by 12%/10% to S$293mn/S$338mn following lower-than-expected sales. We roll over Target Price to 16x FY21e from FY20e, still based on its average PE in the past five years.
- See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.
- Our Target Price climbs to S$18.60 from S$18.40.
- Recovery is slower than expected but net cash of S$829mn, yields of 4% and ROEs of 13% are expected to provide support to Venture Corp Share Price.
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2020-11-09
SGX Stock
Analyst Report
18.60
UP
18.400
