Venture Corp - UOB Kay Hian 2022-03-28: Positive Indicators & Attractive Valuation Indicate Good Buying Opportunity


Venture Corp - Positive Indicators & Attractive Valuation Indicate Good Buying Opportunity

  • We note that multiple positive indicators should help Venture Corp (SGX:V03) re-rate upward, including:
    1. a positive outlook statement from Venture Corp,
    2. positive growth forecasts from Venture Corp’s customers for 2022, and
    3. easing of border restrictions helping to improve component shortages.
  • Venture Corp is currently trading at an attractive 2022F ex-cash P/E of 13x vs its clients’ average P/E of 28x and it offers a dividend yield of 4.5%.

Venture Corp anticipates a robust demand outlook.

  • In its recent 2021 results, Venture Corporation (SGX:V03) highlighted that it expects a robust demand outlook based on customers’ orders and forecasts across various technology domains. In the life science domain, demand for products in the area of analytical instruments remains strong. Growing trends in next-generation sequencing and other breakthrough technologies where its R&D Labs are engaged in are driving demand.
  • Positive market momentum is also visible across instrumentation, test and measurement, networking and communications, as well as advanced industrials domains, where several new product introductions are expected. Customers in the lifestyle and wellness sectors have provided positive outlook.

Positive forward guidance from all of Venture Corp’s customers and ability to outperform customers’ growth.

  • In the list of Venture Corp’s customers that we track, all the customers are guiding for revenue growth for 2022, in the range of 5-16% y-o-y. This trend is consistent with Venture Corp’s latest outlook statement.
    • Broadcomm: Expects 1Q22 revenue growth of 14% y-o-y.
    • NCR: 2022 guidance of 12-15% y-o-y revenue growth and 27-39% y-o-y EPS growth.
    • Agilent: 2022 guidance of 7% y-o-y revenue and EPS growth.
    • Fortive: Expects 2022 revenue growth of 7% y-o-y.
    • Keysight: Expects 2022 revenue growth of 5% y-o-y.
    • Illumina: Expects 2022 revenue growth of 14-16% y-o-y.
    • Waters: Expects 2022 revenue growth of 6% y-o-y.
    • Philip Morris: Expects 2022 revenue growth of 4-6% y-o-y and EPS growth of 8-11% y-o-y.
  • More importantly, we believe Venture Corp could capture higher growth than its customers’ revenue growth, given its ability to provide customised solutions for new product launches and entrance into new high growth domains including semiconductor and electric vehicles.

Easing of border restrictions globally should help improve component shortages.

  • In Feb 22, Hon Hai, the biggest assembler of iPhones, highlighted that a major improvement in part shortages is likely in the first quarter, with “overall supply constraints” set to ease in the second half of the year. In addition to this, the further easing of border restrictions globally should help to improve the component shortage issues, from easier access to labour and reduction of air freight rate.

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 dividends or better than that in the preceding years.

Maintain BUY on Venture Corp

John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-03-28
SGX Stock Analyst Report BUY MAINTAIN BUY 22.800 SAME 22.800