GRAND VENTURE TECHNOLOGY LTD (SGX:JLB)
Grand Venture Technology - Solid Growth Backed By High Demand
- Grand Venture Technology (SGX:JLB) is a manufacturing solutions and service provider for the semiconductor, analytical life sciences, electronics and other industries, with operations in Singapore, Malaysia and China. The Group serves some of the largest Original Equipment Manufacturers and analytical life sciences players, for the manufacture and assembly of complex precision machining, sheet metal components and other laboratories testing and pharmaceutical applications.
Strong 1QFY21 with semiconductor segment spearheading gains.
- Grand Venture Technology recorded a 59.0% y-o-y increase in 1QFY21 revenue from S$14.5m to S$23.0m. The increase in revenue came on the back of growth in all 3 business segments, with semiconductor leading gains (+68.5% y-o-y), life sciences segment (+38.4%), and electronics, medical and others (+42.2%).
- Grand Venture Technology's net profit in 1QFY21 surged by 5.3x to S$3.3 million in 1QFY21, from S$0.6 million in 1QFY20, due to growing share of customers. Grand Venture Technology recorded a stronger gross margin at 32.1% (1QFY20: 22.9%), due to improved capacity utilisation.
Growth in all 3 segments likely to sustain,
- with strong global semiconductor demand persisting, expected to grow at a CAGR of 19.7% in 2021 and 8.8% in 2022. The mass spectrometry market is seeing rising demand due to more stringent regulations and higher testing activity. Ageing population, higher income levels and rise in minimally invasive procedures will strengthen demand for production of surgical microscope.
Capex will drive growth and scale output.
- Grand Venture Technology raised S$23.5m in net placement proceeds, of which S$8.0m is allocated towards capex. The new Penang factory purchased this year will add ~23% to capacity when renovations are completed and operating at full production levels.
- Management guided that visibility of orders is around 9-12 months presently, but they are limited by the current level of production capacity. Thus, we expect high return on investment on their capital spending.
Initiate coverage on Grand Venture Technology with a BUY rating
- Our DCF-derived target price for Grand Venture Technology translates into a FY21E/FY22E P/E of 25.1x and 21.2x respectively. We expect the high semiconductor demand and chip shortage, rising healthcare needs for higher precision equipment, and higher expected Capex to continue to propel growth.
- Our target price implies a 15.7% upside to the last traded Grand Venture share price.
- We also like Grand Venture Technology for their experienced (over 20+ years on average) management team, and its history of profitability since 2016, even before their IPO in 2019.
- See
- See the report attached below for complete analysis on Grand Venture Technology.
Key Risks:
- Labour restrictions, key customer risks and competition
Lim Li Jun Tracy
SAC Capital Research
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https://www.saccapital.com.sg/
2021-07-23
SGX Stock
Analyst Report
1.18
SAME
1.18
