Venture Corporation - DBS Research 2021-03-01: Leader Of The Pack; Maintain Buy

VENTURE CORPORATION LIMITED (SGX:V03)

Venture Corporation - Leader Of The Pack; Maintain Buy

Venture Corp's FY20 results in line; expect strong recovery seen in 2H20 to extend into FY21F.
2H20 net margins improved to 10.1% from 9.6% in 1H20.
New products and ongoing recovery to drive growth; opportunities in trending domains.
No change in forecasts; maintain BUY and target price of S$24.30.

Venture Corp (SGX:V03) reported FY20 net profit of S$297.3m, down 18.1% y-o-y, on the back of a 17.1% decline in revenue to S$3,012.9m, in line with our forecasts. 2H20 showed a significant improvement from 1H20, reflecting a steady recovery from the various disruptions caused by the global COVID-19 pandemic.
Revenue for 2H20 registered a 20.6% increase from 1H20 while net profit surged 27.8% vs 1H20. The improvement came from Life Science, Medical, and Networking & Communications, partly offset by weaker performance for divisions like Advanced Payment Systems.
A S$0.50 dividend was declared, bringing Venture Corp's total dividend for FY20 to S$0.75, vs S$0.70 in FY19.

The improvement in margins demonstrates Venture’s resilience and its differentiating capabilities to capture growth. One of Venture Corp's key strength is its ability to attract new partners/customers seeking its complete end-to-end solutions from R&D right through product commercialisation.

Venture Corp’s cash position of S$928.7m remained healthy, up 30% from S$713.4m at end-December 2019, even after a higher interim dividend payment of S$72.5m in September 2020. Its cash now accounts for ~17% of its market capitalisation.
Venture Corp has zero debt. With improved cash level, Venture Corp is in a stronger position to further enhance its technological capabilities to propel the group to the next level of excellence.

New products/ services initiatives (NPI) in 2021 is expected to drive FY21 earnings higher. A number of these NPIs have been pushed back to FY21 due to the demand and supply disruption in FY20 as a result of the COVID-19 pandemic. However, due to the chip shortages, some of the NPIs could see a slight delay, likely to 2H21.

Going forward, besides the Life Science Technologies, Medical Devices/Equipment and Lifestyle and Wellness Consumer Products domains which Venture has already made good headway, the group is exploring other growth areas. These include the wide-ranging advances and growing applications of Photonics, Networking and Communications and Advanced Semiconductor-related Equipment domains.
Others would include the Battery Electric Vehicle industry and the Robotics, Automation and Artificial Intelligence domains.

No change to our earnings forecasts given the in line results. Our target price of S$24.30 for Venture Corp is pegged to 20.3x, +2SD of its average forward P/E on FY21F earnings.
See Venture Corp Share Price; Venture Corp Target Price; Venture Corp Analyst Reports; Venture Corp Dividend History; Venture Corp Announcements; Venture Corp Latest News.
We continue to like Venture Corp for its differentiating capabilities to attract key leaders in the respective domains that it has a presence in, and to offer end-to-end solutions from R&D right through product commercialisation. BUY for steady recovery and quality earnings of a tech blue chip.

Lee Keng LING DBS Group Research | https://www.dbsvickers.com/ 2021-03-01

SGX Stock Analyst Report BUY MAINTAIN BUY 24.300 SAME 24.300