Venture Corporation - Phillip Securities 2021-11-05: Disrupted Quarter

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

Venture Corporation - Disrupted Quarter

  • Results were below forecast. Venture Corp (SGX:V03)'s 3Q21 PATMI declined 4% y-o-y to S$77mil. year-to-date21 Revenue and PATMI were 66% and 63% respectively.
  • Fulfilment of customer orders disrupted by global components shortages and the Extended Movement Control Order (or factory closures) in Malaysia.
  • We are lowering our FY21e revenue and PATMI forecast for Venture Corp by 6% and 10% respectively. Recovery this quarter has been stalled due to production disruptions. Venture Corp mentioned that demand is healthy and broad-based demand. In addition, the workforce in Malaysia is almost fully vaccinated, which should allow manufacturing activities to resume as normal. We expect some spill-over of orders into 4Q21.



The Positive


Healthy balance sheet and margins.

  • Net margins improved marginally to 10%. We assume the high-value low mix projects have been sustaining margins despite the weaker revenue and loss of operating leverage.
  • Venture Corp's net cash was S$853mil at 3Q21. There was a spike in inventory by S$154mil y-o-y to S$908mil. We believe there is buffer inventory to cope with the unpredictability in component supply.


The Negative


Another weak quarter in revenue.

  • Pre-pandemic, the quarterly run-rate in revenue was around S$900mil. This has dropped to S$700m this year. Venture Corp has struggled to keep revenues to pre-pandemic levels these past two years despite the global resurgence in electronics demand. The pivot to life science and consequent long timeline to ramp up is a factor, in our opinion.
  • We expect Venture Corp's revenue to rebound in 4Q21e to S$916mil, an 11% y-o-y rise.


Outlook

  • Venture Corp commented that new product introductions are expected to flow to mass production over the next 12 months.

Maintain NEUTRAL on Venture Corp with unchanged target price of S$19.20






Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2021-11-05
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 19.200 SAME 19.200



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