Venture Corporation - Phillip Securities 2020-11-09: Recovery Slower Than Expected

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






Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2020-11-09
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 18.60 UP 18.400



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