Venture Corporation - UOB Kay Hian 2022-05-04: 1Q22 Results Above Expectations; Outlook Remains Positive

VENTURE CORPORATION LIMITED (SGX:V03)

Venture Corporation - 1Q22 Results Above Expectations; Outlook Remains Positive

Venture Corporation’s 1Q22 earnings of S$84m (+29% y-o-y) beat our expectation by 8%. Six out of seven domains recorded growth due to strong customer demand and Venture Corporation’ improved ability to overcome component shortages thanks to several initiatives from its R&D labs.

Venture Corporation anticipates a steady demand outlook across various technology domains and is ready to proactively resolve any challenges as and when they arise. Maintain BUY and target price of S$22.80 (pegged to +1 standard deviation, 19.5x 2022F PE).

Venture Corporation (SGX:V03)’s 1Q22 earnings of S$84m (+29% y-o-y) beat our expectation by 8%. The strong growth was due to growth across nearly all the domains and Venture Corporation’s improved ability to overcome supply chain disruptions thanks to several initiatives by its R&D labs.
Net margin remained stable at 9.5%, which is a testament of Venture Corporation’s differentiating capabilities and pricing power.

Based on its customers’ orders and forecasts, Venture Corporation anticipates a steady demand outlook across its technology domains such as Lifestyle & Wellness, Life Science, Instrumentation, Test & Measurement Technology and Advanced Industrial domains. Recent new product launches have been well received by end-customers and have contributed to additional growth.
Venture Corporation remains optimistic about its long-term prospects. It has gained good traction in selected ecosystems of interests, becoming a leading technology partner of choice for many global players.
Positive guidance of Venture Corporation's key customers:
- 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%.

Several initiatives undertaken by Venture Corporation to overcome supply chain disruptions include:
1. redesigning the products to reduce dependency on parts that are in shortages,
2. working with customers to obtain a longer order forecast for better procurement and production planning, and
3. increasing stockpiling of inventories and sharing the working capital burden with customers.
Combined with the strong design and R&D capabilities of Venture Corporation, the company is able to provide unique solutions to win market share and clients that are of high quality amid this uncertain environment.
Venture Corporation remains positive on its long-term growth as it continues to engage and collaborate with successful and innovative customers in various high-growth, fast expanding market segments.

On 8 Nov 21, Mr Wong Ngit Leong, the Executive Chairman and largest shareholder of Venture Corporation, acquired 200,000 shares at S$18.73/share. Previously, his acquisition of 566,300 shares at an average price of S$14.45/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 in Apr 18.

As of end-1Q22, Venture Corporation recorded net cash of S$815m (accounting for about 15% of its current market cap) and led the pack of US-listed peers which were mostly in net debt positions.
More importantly, Venture Corporation has consistently paid the same amount of dividends or better than that in the preceding years.

We maintain our earnings forecasts. Maintain BUY rating on Venture Corporation and target price of S$22.80, pegged to +1 standard deviation above its forward mean P/E, of 19.5x on 2022F earnings. Currently, Venture Corporation offers an attractive dividend yield of 4.7%.
See

John Cheong UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-05-04

SGX Stock Analyst Report BUY MAINTAIN BUY 22.800 SAME 22.800