Venture Corporation - UOB Kay Hian 2020-11-09: 3Q20 Results In Line; Sequential Recovery Demonstrates Resilience


Venture Corporation - 3Q20 Results In Line; Sequential Recovery Demonstrates Resilience

  • Venture Corp's 3Q20 net profit fell 6% y-o-y (+14% q-o-q), with 9M20 forming 71% of our full-year estimate. Sequential recovery continued in 3Q20 due to:
    1. further reopening of economies; and
    2. better demand for customers’ essential products.
  • 4Q20 should continue to enjoy q-o-q sequential recovery. New products are expected to be launched in 2021, and demand for key segments (medical devices, networking and semiconductor) appears unabated.
  • Maintain BUY on Venture Corp and target price of S$23.76 (19.4x 2021F EPS, +1SD of mean).

Venture Corp's 3Q20 results in line, sequential recovery trend continues.

  • Venture Corp (SGX:V03)’s 3Q20 net profit of S$80.2m (-6% y-o-y, +14% q-o-q) is in line with our expectations. 9M20 accounted for 71% of our full-year forecast. Venture has also raised its interim dividend slightly to S$0.25 in 1H20, up from S$0.20 in 1H19. The sequential recovery was due to broad-based growth across the group’s portfolio of technology domains.
  • There was strong demand from customers in the life science, medical devices, healthcare & wellness, networking & telecommunications, and semiconductor-related equipment domains.
  • In addition, there was increased demand for customers’ essential products and services, such as ventilators and polymerase chain reaction equipment. 3Q20 net margin of 9.8% remained at a normalised level of around 10% (3Q19: 9.8%).

New products expected in 2021.

  • Venture Corp plans to release several new products throughout 2021. These include domains such as life science & genomics, healthcare & wellness, as well as COVID-19-related detection, testing, diagnostic products and solutions.
  • Demand for medical devices, networking & communications and semiconductor-related modules & equipment is also resilient.

Strengthening clusters of excellence.

  • In the next few years, Venture Corp will continue to strengthen its operations in the US, China and Southeast Asia. The diversity of its expertise will drive its growth in selected technology domains.
  • Strong balance sheet and good dividends limit share price downside. As of end-1H20, Venture Corp recorded net cash of S$831m (forming about 15% of its current market cap) and led the pack of US-listed peers which were mostly in net debt positions.
  • More importantly, Venture Corp has consistently paid the same amount of dividends or better than that in the preceding year. We expect a dividend of 75 cents/share this year, which translates into an attractive dividend yield of 3.8%. See Venture Corp Dividend History.

Maintain BUY on Venture Corp

John Cheong UOB Kay Hian Research | Joohijit Kaur UOB Kay Hian | 2020-11-09
SGX Stock Analyst Report BUY MAINTAIN BUY 23.760 SAME 23.760