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Venture Corporation - Phillip Securities 2022-08-08: Riding On Easing Of Lockdowns & Improving Supply Chain

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

Venture Corporation - Riding On Easing Of Lockdowns & Improving Supply Chain

  • Venture Corp (SGX:V03)'s 1H22 Revenue/PATMI was within expectations at 53%/48% of our FY22e earnings. 2Q22 PATMI jumped 21% y-o-y to S$90mil, back to pre-pandemic levels.
  • Venture Corp is coping with the supply chain constraint by piling up inventories. 2Q22 registered a 63% jump in inventories or S$483mil rise to S$1.25bn.
  • The guidance for 2H22 is positive with customer demand remaining unabated. We lift our earnings forecast for Venture Corp by 5%, to account for a stronger 2H22. Our target price is modestly nudged up to S$20.80, based on 16x P/E FY22e, its 5-year average.



The Positive


Customer demand robust.

  • Venture Corp's 1H22 revenue growth was broad-based across all verticals. Some demand continues to be unmet due to supply chain challenges. Revenue in 2Q22 was the 2nd highest since 2Q18.


The Negative


Increase ineffective tax rate.

  • The higher effective tax was a negative surprise. It jumped to 18% in 1H22 due to lower tax incentives in Singapore. The effective tax was trending around 14% pre-pandemic. A possible reason for the decline in incentives is the lower CAPEX and R&D expenses over the past several years.


Outlook

  • FY22e is on track to become a recovery year for Venture Corp. Demand from customers is healthy and unabated, especially from last year’s disruption that included factory shutdowns in Malaysia and the inability to fulfil demand.

Maintain BUY with a higher target price of S$20.80 (previously S$20.00)






Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2022-08-08
SGX Stock Analyst Report BUY MAINTAIN BUY 20.80 UP 20.000



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