VENTURE CORPORATION LIMITED (SGX:V03)
Venture Corporation - Steady 3Q20 With a Better Outlook; Stay BUY
- Venture Corp has continued its trajectory of recovery with 3Q20 NPAT up 14.2% y-o-y, in line with our estimate. Management expects to deliver a stronger 2H20 (vs 1H20), if COVID-19-related lockdowns and disruptions do not deteriorate further.
- Venture Corp is fulfilling its order backlog at present, while its research and development (R&D) laboratories aim to release a number of new products for the manufacturing segment from early 2021 onwards.
- Stay BUY, S$22.60 target price, 14% upside with c.4% FY21F yield.
Trying hard to maintain margins despite lower revenue.
- Venture Corp (SGX:V03) continues to work with customers, implementing further cost controls and improving production efficiency. ASP pressure is likely to be aligned with end-market demand, looking forward.
- Meanwhile, non-essential segments may see some pressure as well, given the slower rate of recovery
Production unlikely to return to high levels.
- Venture Corp's production is not able to rebound to pre-COVID-10 levels due to social distancing measures. As such, Venture Corp’s aim now is to meet demand, and balance this with order delivery. Its top 10 customers now account for 45-55% of revenue (vs 50- 60% prior to the pandemic), although the company is increasingly diversifying its clientele.
Growth in several segments.
- Over 2021, new products/solutions engineered and developed in Venture Corp’s R&D labs are scheduled for release into the end-markets by its partners and customers in several technology domains. These include fast-growing domains and ecosystems such as life sciences & genomics, healthcare & wellness, as well as COVID-19-related detection, testing, diagnostic products and solutions.
- Demand for medical devices & equipment, networking & communications, and semiconductor-correlated modules and equipment appears unabated, as well.
Better quarters ahead.
- We peg Venture Corp to a FY21F P/E of 19x, to reflect the company’s resilient margins and stability it has over its peers.
- See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.
- On rewarding investors, Venture Corp prefers to pay long-term stable and sustainable dividends. It declared a higher interim dividend of S$0.25 for 1H20, compared to S$0.20 in 1H19. Assuming the final dividend remains unchanged, FY20F DPS will likely be raised to S$0.75, representing a c.4% FY20F yield. We think this is highly sustainable, and shareholders would likely continue to enjoy higher dividends if the company’s performance continues to improve. As a result, we maintain BUY on Venture Corp.
- Key downside risks to our call are decelerating economic growth and the US-China trade war.
Jarick Seet
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-11-09
SGX Stock
Analyst Report
22.600
SAME
22.600
