Venture Corporation - Phillip Securities 2021-05-02: Another Type Of Disruption

VENTURE CORPORATION LIMITED (SGX:V03) | SGinvestors.io VENTURE CORPORATION LIMITED (SGX:V03)

Venture Corporation - Another Type Of Disruption

  • Venture Corp (SGX:V03)'s 1Q21 revenue and PATMI rose 2% and 8% y-o-y respectively. Profit growth is below our forecast of +17%. Net cash was a record S$989mn.
  • We had expected a stronger rebound from last year’s low base caused by pandemic disruptions.
  • Order pipeline is strong but fulfilment is affected by short supply of parts and components.
  • Maintain NEUTRAL. Our target price is unchanged at 16x FY21e P/E, its 5-year average P/E.



What's New



The Positives


Stellar balance sheet, record net cash.

  • Net cash as at end-March 2021 was S$989mn, a record for Venture Corp.
  • Operating cash flow built up from higher earnings and stable working capital. We expect higher dividends from its large cash hoard and improving operating environment.

Margins expanded despite sluggish sales growth.

  • 1Q21 PBT margin of 10.9% was an improvement over 1Q20’s 10.4% and above 2015-16 margins of 8% when revenue was at similar levels. Venture Corp’s shift to more sophisticated and leading-edge products was a major contributing factor, in our opinion.


The Negative


Revenue growth sluggish.

  • Venture Corp's 1Q21 revenue only expanded 2% y-o-y. This was paltry considering 1Q20 revenue had collapsed 27.5% y-o-y under severe disruptions of supply chains in China and Malaysia. Venture Corp attributed this year’s weakness to shortages of parts and components.


Outlook

  • Venture Corp has guided for:
    • q-o-q improvement in 2Q21 earnings;
    • a stronger 1H21 y-o-y;
    • broad-based strength across domains;
    • strength in leading-edge healthcare products; and
    • an impending launch of new semiconductor and networking products.

Maintain NEUTRAL with unchanged target price of S$19.20






Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2021-05-02
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 19.200 SAME 19.200



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