VENTURE CORPORATION LIMITED (SGX:V03)
Venture Corporation - A Clearer Path Ahead; Maintain BUY
- Venture Corp has continued its recovery trajectory (NPAT: +14.2% y-o-y), in line with our estimates. Management expects to deliver a stronger 2H20 vs 1H20 – provided COVID-19-induced lockdowns and disruptions do not deteriorate further.
- Venture Corp is currently fulfilling its backlog of existing orders while its research & development (R&D) labs have plans to subsequently release a number of newly developed products into manufacturing early 2021.
Trying hard to maintain margins despite lower revenue.
- Venture Corp (SGX:V03) continues to work with its customers, implementing further cost controls and improving production efficiency. ASP pressures will align to end-market demand, in our view. Non-essential market segments may see some pressure, though, given the slower rate of recovery.
Production is unlikely to return to high levels.
- Production will unlikely to go back to pre-COVID-19 levels due to social distancing, with Venture Corp’s main aim is to meeting customer demand, as well as how to balance orders and deliver such orders to clients. Top 10 customers now form 45-55% of revenue vs 50-60% previously, given the increasing client diversification.
Growth seen in several segments.
- New products/solutions engineered and developed in Venture Corp’s R&D labs are scheduled for release into end markets during 1H21 and 2H21 by partners and customers in several technology domains. These include fast-growing domains and ecosystems such as life science & genomics, healthcare & wellness, as well as COVID-19-related detection, testing, and diagnostic products and solutions.
- Demand for medical devices & equipment, networking & communications, and semiconductor correlated modules & equipment also appear unabated.
A clearer path ahead.
- We peg Venture Corp to a higher multiple of 19x to reflect its resilient margins and stability vis-à-vis peers. On the dividend front, Venture Corp prefers to give long-term stable and sustainable dividends. It declared a higher interim dividend of 25 cents (1H19: 20 cents).
- Assuming the final dividend remains unchanged, Venture Corp's FY20 dividend will likely be raised to 75 cents, which represents a 3.9% yield. We think this is highly sustainable and shareholders are likely to continue enjoying higher dividends if the group’s performance continues to improve. As a result, we maintain our BUY call.
- See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.
- Key risks are slowing economic growth and a worsening of the US-China trade war.
- Venture Corp is also highlighted as one of the RHB's stock picks for 2021. See: Singapore Market Strategy - RHB Invest 2020-12-14: Key Themes In 2021 & Stock Picks.
Jarick Seet
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-12-22
SGX Stock
Analyst Report
22.600
SAME
22.600
