Venture Corporation - CGS-CIMB Research 2021-02-27: Expecting A Better FY21 Ahead

VENTURE CORPORATION LIMITED (SGX:V03)

Venture Corporation - Expecting A Better FY21 Ahead

Venture Corp's FY20 revenue was deemed in line, at 95.3%/97.4% of our/Bloomberg consensus expectations.
FY20 net profit at 96.5%/97.6% of our/Bloomberg consensus expectations was also deemed in line (-17.1% y-o-y due to the COVID-19 pandemic).
We expect to see y-o-y growth in FY21F net profit. Reiterate ADD.

Venture Corp (SGX:V03)'s FY20 revenue (-17.1% y-o-y due to the COVID-19 pandemic) was deemed in line at 95.3%/97.4% of our/Bloomberg consensus expectations. FY20 net profit also came in within expectations, at 96.5%/97.6% of our/Bloomberg consensus expectations.
Venture Corp did well in managing costs in FY20, paring employee costs by 9.6% y-o-y and other operating expenses by 12.4%. Together with product mix changes and better tax efficiency, net profit margin fell marginally to 9.9% in FY20 (vs. 10.0% in FY19).
As at end- Dec 2020, Venture Corp’s balance sheet remained in a net cash position (S$928.7m), and it declared a final dividend of S$0.50, bringing its full-year dividend to S$0.75 per share.
Working capital also decreased to S$961.6m as at end-Dec 2020 (better receivables collection), against S$1,114.7m as at end-Dec 2019.

Venture Corp continues to progress ahead in its transformation away from a pure electronic manufacturing services (EMS) company. It sees strong growth opportunities in various technology domains.
In life sciences, it expects demand for genomics-related products and solutions and advanced equipment for analysis/diagnostic use in biological systems will drive growth in this segment. Venture Corp is also developing devices and solutions in life science technologies, medical devices/equipment, and lifestyle and wellness-related consumer products.
Venture Corp will also widen its participation in the robotics, automation, artificial intelligence and advanced semiconductor-related equipment domains. It also sees strong growth potential in the electric vehicle battery industry.

We leave our Venture Corp's FY21-22F earnings forecasts for unchanged and introduce FY23F forecasts. At an unchanged 18.5x FY21F EPS (0.5 s.d. above its 14-year average of 15x), our target price for Venture Corp remains at S$24.84.
See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.
Catalysts are new product launches by customers. A worsening of the COVID-19 outbreak remains a downside risk.
A net cash balance sheet (S$928.7m as at end-Dec 2020) supports Venture Corp’s ambitions to sharpen its competitive advantage, either through talent acquisition or selective M&As, as well as our 3.7% dividend yield forecasts over FY21-23F.

William TNG CFA CGS-CIMB Research | https://www.cgs-cimb.com 2021-02-27

SGX Stock Analyst Report ADD MAINTAIN ADD 24.840 SAME 24.840