Venture Corporation - OCBC Investment 2021-03-02: New Year, New Hopes

VENTURE CORPORATION LIMITED (SGX:V03)

Venture Corporation - New Year, New Hopes

Venture Corp's FY20 net profit in-line; good cost control for the year.
Looking forward to growth in its Life Science Technologies domain; potential opportunities in Battery Electric Vehicles.
Fair Value of S$22.25 (previously S$22.30).

Venture Corp (SGX:V03)’s 4Q20 revenue fell 11% y-o-y to S$829m, while increasing 1% q-o-q.

FY20 saw Venture Corp keeping a lid on costs, with employee benefits expense down ~10%, and other operating expenses down ~12%.
4Q20 net profit came in at S$87m, with FY20 net profit coming in at S$297m, broadly in-line with consensus. 4Q20 net profit margin came in at 10.5%, which we understand is on the back of a combination of higher R&D value capture, improvement in sales and a lower effective tax rate.
Venture Corp has declared a full-year dividend of S$0.75 per share (2019: S$0.70).

Looking forward, we believe new products introductions are on track for launch in 2Q21 and through 2H21. Venture Corp has highlighted that expected demand for genomics-related products and solutions and advanced equipment for analysis/diagnostic use in biological systems will drive growth in its Life Science Technologies domain.
We note that COVID-19 has presented opportunities in the development of pandemic-related testing and diagnostic products and solutions. Venture Corp notes that it will increase its participation and tap into the growth of Robotics, Automation and Artificial Intelligence, and Advanced Semiconductor-related Equipment domains. Venture Corp is also optimistic about opportunities in adjacent domains, such as the Battery Electric Vehicle industry.
Still, we believe that one potential form of near-term downside risks could come from product delays arising from the ongoing chip shortage.

Venture Corp possesses a strong balance sheet, with net cash of S$929m despite an increase in total dividends paid in FY20 vs FY19. This should give the group ample dry powder especially as it ventures into new growth areas, and gives support to our FY21 dividend yield forecast of ~4.0% (as at 1 Mar 2021 close).
Venture Corp's working capital has also dropped y-o-y (~S$153m), on the back of lower receivables and inventories.
Following adjustments to our assumptions, and our target P/E of 18.2x (2 S.D. above the 5-year mean), we derive a fair value of S$22.25 for Venture Corp. (previously S$22.30).
See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.

Carmen Lee OCBC Investment Research | https://www.iocbc.com/ 2021-03-02

SGX Stock Analyst Report BUY MAINTAIN BUY 22.25 DOWN 22.300