Venture Corporation - UOB Kay Hian 2022-02-11: Healthy Customers’ Results & Improved Production Indicate A Robust 4Q21

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VENTURE CORPORATION LIMITED (SGX:V03)

Venture Corporation - Healthy Customers’ Results & Improved Production Indicate A Robust 4Q21

• We expect Venture Corp (SGX:V03) to report 4Q21 earnings of S$79.5m (-8% y-o-y, +3% q-o-q), below consensus’s estimate of S$91.4m (+6% y-o-y, +19% q-o-q).
• We think our 4Q21 earnings estimate may be too conservative due to:
  1. healthy results and outlook of all Venture Corp’s customers which have reported their 4Q21 results,
  2. relaxed restrictions since Sep 21 which allowed the majority of Venture Corp’s workers to return to work, and
  3. positive signals from insider share purchases.

Expect a robust 4Q21 for Venture Corp, above our estimates.

• Venture Corp is scheduled to report its 4Q21 results on 25 Feb 21 and we expect its 4Q21 net profit to come in at S$79.5m (-8% y-o-y, +3% q-o-q).
• Our estimate is below consensus’ S$91.4m (+6% y-o-y, +19% q-o-q) due to earlier concerns of global component shortages and the extended Movement Control Order (MCO) in Malaysia which started from Jun 21. However, at this point, we believe our earnings estimate for 4Q21 is too conservative due to:
  1. healthy revenue growth of all Venture Corp’s customers,
  2. improved production capacity since Sep 21, and
  3. positive signals from insider share purchases.

Healthy revenue growth of all Venture Corp’s customers that have reported 4Q21 results and positive forward guidance.

• In the list of Venture Corp’s customers that we track, five out of ten of the workforce, coupled with pent-up customers’ demand, we think that Venture Corp’s production output should see notable improvement q-o-q.

Positive signal from recent share purchases of the Executive Chairman.

• On 8 Nov 21, Mr Wong Ngit Leong, the Executive Chairman and largest shareholder of Venture Corp, acquired 200,000 shares at S$18.73 per share. Previously, his acquisition of 566,300 shares at an average price of S$14.45 per share from Jul-Sep 17 turned out to be a strong positive signal as Venture Corp's share price hit an all-time high of S$29.50 on Apr 18.

Positive demand/forecast outlook from customers.

• In its latest outlook statement, Venture Corp highlighted that its customers’ demand activities for its new products, which are expected to go into mass production over the next 12 months.

Strong balance sheet and good dividends provide limited share price downside.

• As of end-3Q21, Venture Corp recorded net cash of deviation above its forward mean P/E, of 19.5x on 2022F 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.
• At the current price, Venture Corp offers an attractive dividend yield of 4.0%.

John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-02-11

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