Venture Corporation - Maybank Kim Eng 2021-05-02: Slowed By Shortages

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VENTURE CORPORATION LIMITED (SGX:V03)

Venture Corporation - Slowed By Shortages

Venture Corp's 1Q21 miss; maintain BUY on demand strength

• Venture Corp (SGX:V03)'s 1Q21 PATMI of S$65.3m (+8.3% y-o-y) fell short of our expectations, accounting for only 19% of our FY21E, as we underestimated the impact of components shortages on short-term performance.
• As Venture Corp is noting broad-based demand strength, and is working with stakeholders to procure components needed, we maintain BUY with unchanged target price of S$22.00 (18.5x FY21E P/E, 1.5 standard deviation above 4-year mean).
• Key risk is if shortages persist and further caps earnings recovery.

Broad-based strength

• Despite a strong order outlook, Venture Corp's 1Q21 revenue rose only 2% y-o-y to S$686.7m amid a global shortage of components. Net margin improved 0.5ppt y-o-y to 9.5%.
• Venture Corp notes broad-based strength across Venture Corp’s technology domains, notably new order strength in life science, medtech, and lifestyle & wellness. At the same time, new products across instrumentation, network & communications, advanced industrials and advanced semiconductor-related equipment will be launched amid a robust backdrop for electronic test equipment, optical & photonics networking solutions, and 5G infrastructure development.

All hands on deck to meet delivery plans

• Venture Corp has set up several working groups to manage its global supply base. It is working with stakeholders across the supply chain, including customers and suppliers to secure parts needed to meet its shipment plans. Venture Corp expects sequential improvement in 2Q21 which should result in 1H21 performance being higher y-o-y.

Risks

• We remain positive towards Venture Corp as the improving order outlook reflects strength across its end-markets. The risk is if shortages exacerbate further and limit Venture Corp’s earnings recovery potential in the coming quarters.
• We reiterate our preference for tech stocks with greater exposure to semicon equipment end-markets (e.g. UMS (SGX:558)) as current chip shortages are a tailwind for earnings.
• See
  • Venture Corp's Share Price,
  • Venture Corp's Target Price,
  • Venture Corp's Analyst Reports,
  • Venture Corp's Dividend History,
  • Venture Corp's Announcements,
  • Venture Corp's Latest News.

Gene Lih Lai CFA Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2021-05-02

SGX Stock Analyst Report BUY MAINTAIN BUY 22.000 SAME 22.000