Riding a Post-COVID Recovery; BUY
- Venture Corp (SGX:V03)'s 1Q22 PATMI of S$84m (+28.6% y-o-y) beat our and consensus estimates, accounting for ~24% of our full year forecast (1Q historically accounts for ~20-22%), driven by broad-based growth.
- Maintain BUY with unchanged target price (17.2x FY22E P/E) as we see earnings recovery this year towards pre-COVID levels (2019: S$363m) as a catalyst, as this narrative contrasts other tech plays globally where demand slowdown is a key concern.
Broad-based Growth Drives Strong Momentum
- Revenue grew 29.5% y-o-y to S$889.3m on the back of broad-based growth (6 out of 7 domains registered growth). Despite inflationary pressures, PBT margin was healthy at 11.5% (+0.6ppt q-o-q, -0.6ppt y-o-y), which was attributed to Venture Corp’s differentiating capabilities versus competitors and cost control, among others. Effective tax rate rose from 12.9% to 18.0%, primarily due to lower incentives in Singapore after the global minimum tax rate agreement.
- Within growth domains, advanced payments and healthcare & wellness stood out in 1Q22, largely catalysed by the reinvigoration of retail and hospitality sectors globally amid re-openings.
Living With Challenges
- Venture Corp expects the near-term operating environment to remain uncertain. Amid a still strong demand backdrop, some ways to mitigate supply-side challenges include holding higher levels of inventory to ensure availability of components, and component redesign. For the latter, enabling factors are
- having design content many years.
Bright Demand Outlook
- Customers’ orders and forecasts continue to issues and inflation.
Source: Maybank Research - 1 May 2022
