VENTURE CORPORATION LIMITED (SGX:V03)
Venture Corporation - Earnings Close To Record Levels
- Venture Corp (SGX:V03)'s 1Q22 PAT rose 28% y-o-y to S$84mil and beat our estimates by 10%. It was the 2nd highest Mar quarter for Venture. PAT was 23% of our FY22e forecast.
- Venture Corp has coped well with supply chain challenges through a strong balance sheet to bulk up on inventories and re-design of products with new components.
- Outlook remains upbeat with customers committing to six to 12 months of visibility. We also believe new products especially life science are gaining more traction. Despite the earnings beat, we maintain our FY22e PATMI forecast for Venture Corp. We are incorporating a buffer as the slowing macro environment remains a concern.
The Positive
Revenue building up momentum.
- Revenue momentum has picked up since 4Q21. Revenue is recovering to pre-pandemic levels as factory closures and supply chain disruptions over the past two years start to ease. Due to long lead times and shortages, Venture Corp has managed to re-design products with alternative components.
The Negative
Inventories spiked almost 70% y-o-y to S$1.1bn.
- To support customer orders, Venture Corp needs to hold inventories of semiconductors, materials and other components. It is a near-term drag on working capital. Both receivables and inventory are up S$680mil y-o-y. The additional working capital required was $370mil to fund the $283mil increase in revenue over the past 12 months as payables jumped by S$305mil. Venture Corp's net cash dropped to S$815mil from S$989mil a year ago.
Outlook
- We expect FY22e to be a recovery year for Venture Corp as:
- There is order visibility as customers make longer-term commitments to ensure supply;
- Growth is broad-based across six of their seven key industries;
- Rebound from last year’s factory shutdown in Malaysia; and
- New products gaining more traction with customers, namely in life science and lifestyle and wellness.
Upgrade to BUY from ACCUMULATE with an unchanged target price of S$20.00
- The target price of S$20.00 is unchanged and based on 16x P/E FY22e, its 5-year average. Our recommendation on Venture Corp is upgraded from ACCUMULATE to BUY. The current Venture Corp's share price offers a 5% dividend yield with an attractive unlevered ROE of 13% and a net cash balance sheet of S$808mil.
- See
Paul Chew
Phillip Securities Research
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https://www.stocksbnb.com/
2022-05-03
SGX Stock
Analyst Report
20
SAME
20
