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Venture Corporation - Maybank Research 2022-08-07: Late-cycle Thesis Playing Out, BUY

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

Venture Corporation - Late-cycle Thesis Playing Out, BUY


Beat on demand and margin resilience

  • Venture Corp (SGX:V03)'s 1H22 PATMI of S$174.3m (+24% y-o-y) reached 49% of our and street estimates (1H typically accounts for 45-47%). This was driven by:
    1. improved supply;
    2. strong demand; and
    3. margin resilience.
  • We now base our target price on FY23E P/E (from FY22E) on an unchanged multiple of 17.2x. As such, our target price for Venture Corp rises to S$22.90.
  • We believe our thesis of Venture Corp being a late-cycle beneficiary is playing out, given broad-based demand strength, which we expect to continue in 2H22. BUY.


Margin resilience despite inflationary pressure

  • Venture Corp's 2Q22 revenue rose 21.6% y-o-y to S$906.8m, bringing 1H22 revenue to S$1.8b (+25.4%). All 7 domains registered growth.
  • 2Q22 PBT margin of 12.2% (+0.7% q-o-q, +0.6% y-o-y) expanded despite inflation pressure due to productivity gains and differentiating abilities to value add to customers amid challenging conditions.
  • Inventory rose by ~S$200m to S$1.25b to support customer fulfilment, although management aspires to improve working capital if the supply situation allows for it. Receivables and payables were stable h-o-h.


Demand to be sustained in 2H22


Risks

  • Despite the beat, our forecasts are unchanged, reflecting our conservative stance in view of an environment prone to risks, such as:
    • softening demand;
    • unforeseen supply problems; and
    • exogenous disruptions.
  • Amid the global economic slowdown, the top 2023 risk is if orders decline, in our view.





Gene Lih Lai CFA Maybank Research | https://www.maybank-ke.com.sg/ 2022-08-07
SGX Stock Analyst Report BUY MAINTAIN BUY 22.90 UP 21.000



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