Highlights

Simons Trading Research

Author: simonsg   |   Latest post: Wed, 18 May 2022, 11:34 AM

 

Venture Corporation - Positive Outlook for FY22

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  • Venture Corp's 1H21 revenue grew 4.9% y-o-y, limited by component shortages mainly. 1H21 core net profit was below, at 40%/41% of our/consensus’ FY21F expectations (vs. the 8-year historical average of 45%).
  • Reflecting continued component shortage concerns, our target price for Venture Corp is reduced to S$21.32. Reiterate ADD.

Venture Corp's 1H21 Earnings Affected by Component Shortage

  • Venture Corporation (SGX:V03)’s 1H21 revenue grew 4.9% y-o-y to S$1,432.2m, affected by the ongoing component shortage issue. Venture managed to limit the negative impact from the extended movement control order (EMCO) in Malaysia through efficient re-working of its production scheduling and processes. At 45%/43% of our/consensus’ FY21F revenue expectation, Venture Corp's 1H21F revenue performance was below the 8-year historical average of 48%.
  • Despite the challenges from component shortages and EMCO, Venture Corp’s decision to focus on better-margin business and cost controls helped defend its pre-tax margins (1Q21: 10.9%, 2Q21: 11.6%, 1H21: 11.3%; 1H20: 11.1%).
  • 1H21 core net profit grew 7.6% y-o-y to S$140.4m and formed 40%/41% of our/consensus FY21F expectation. This was also below the 8-year historical average of 45%.
  • Venture Corp's interim dividend was maintained at S$0.25 per share.

End-customer Demand Remains Strong

  • Despite the current operating challenges, Venture Corp said that the next 12 months’ demand outlook remains strong for most of the limiting factor, but Venture Corp is working with customers and suppliers to secure components, as well as exploring component substitution/limited product redesigns.

Reiterate ADD on Venture Corp

  • Although we are believers in the strong end-demand story, the reality of component shortages led us to cut our 17.1x (0.5 standard deviation above its 20-year average of 15.1x) on FY22F, our revised target price for Venture Corp is S$21.32.
  • Re-rating catalysts are new product launches by customers and an improvement in component availability.
  • A worsening of the COVID-19 outbreak and component shortages are downside risks.

Source: CGS-CIMB Research - 6 Aug 2021

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Labels: Venture

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