Venture Corporation - UOB Kay Hian 2021-08-10: 2Q21 Results In Line; Outlook Remains Positive

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

Venture Corporation - 2Q21 Results In Line; Outlook Remains Positive

  • Venture Corporation's 2Q21 earnings (+7% y-o-y, +15% q-o-q) are in line, with 1H21 accounting for 41% of our 2021 estimates. The q-o-q improvement is due to Venture Corporation’s improved ability to overcome challenges from COVID-19 restrictions and component shortages.
  • Venture Corporation continues to see a strong order pipeline. We expect a sequential improvement trend to continue, as Venture Corporation works on fulfilling more orders.
  • We trim our 2021-23 EPS by 7%. Maintain BUY on Venture Corporation and increase target price to S$23.57 (roll over to 2022F, pegged to +1 standard deviation 19.5x PE).



Venture Corp (VMS)'s 2Q21 In Line


improved ability to overcome challenges.

  • Venture Corporation (SGX:V03)’s 2Q21 net profit came in at S$75.1m (+7% y-o-y, +15% q-o-q). 1H21 net profit accounted for 41% of our full-year estimates which we deem in line with expectations as we expect a similar seasonality trend as 2020 (1H20 accounted for 44% of full-year earnings). The better results q-o-q was mainly due to improved ability to overcome challenges from the Movement Control Order (MCO) and component shortages.
  • Venture Corporation has tapped on its R&D team to offer redesigning services to its customers to overcome component shortages which include using several devices to form a circuit instead to overcome the shortages of integrated circuit.
  • In addition, Venture Corporation has vaccinated a majority of its employees in Malaysia, whereby around 95% and 60% of its staffs in Penang and Johor respectively have received at least one dose of vaccine.

Positive demand outlook from customers.

  • In its outlook statement, Venture Corporation highlighted that its customers’ demand outlook appears and semiconductor-related equipment.

VMS continues to invest and develop new capabilities.



STOCK IMPACT

  • Expect sequential share price downside. As of end-1Q21, Venture Corporation recorded net cash of S$990m (accounting for about 17% of its current market cap) and led the pack of US-listed peers which were mostly in net debt positions preceding years.


EARNINGS REVISION

  • We reduce our 2021-23 earnings forecasts for Venture Corporation by 7% to account for potential challenges from component shortages, supply chain disruptions and temporary production disruptions from COVID-19 measures.


VALUATION & RECOMMENDATION






John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-08-10
SGX Stock Analyst Report BUY MAINTAIN BUY 23.57 UP 23.470



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