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Simons Trading Research

Author: simonsg   |   Latest post: Wed, 21 Sep 2022, 11:12 AM

 

Venture Corporation - No Hiccup From Supply Chain Constraints; BUY

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  • Venture Corp reported robust 1H22 numbers, with revenue up 25.4% y-o-y to S$906.8m and NPAT surging by 24.1% y-o-y to S$90.2m – which is slightly higher than our estimates.
  • Going forward, management anticipates demand to remain unabated in 2H22, and expects this to mitigate supply chain constraints. As such, we raise FY22F PATMI forecast for Venture Corp by 2% to S$353m, which results in a new and higher target price (pegged to 19x FY22F P/E).

No Halt to Demand in 2H22F

  • Venture Corporation (SGX:V03) expects demand to be maintained in 2H22, as it still sees resilient demand across its diversified customer base – especially in the life science & genomics, healthcare & wellness, networking & communications, test & measurement instrumentation and process & test equipment in the semiconductor technology domains.
  • Venture Corp's management does not anticipate any weakness in demand in the short term, and still expects this to remain robust across all its verticals.

Supply Chain Constraints Not Likely to Affect Performance

  • Venture Corp continues to see supply lagging behind demand – with challenges from global supply chain constraints, rising inflationary pressures, and a tight labour situation. However, with its operational excellence and increased focused on inventory management, we expect the company to continue mitigating this this issue successfully – just like it did in 1H22.
  • We also think that this headwind is not likely to impact Venture Corp's 2H22 results, if the current condition is unchanged.

Venture Corp Declared 1H22 Interim Dividend of S$0.25

  • Venture Corp declared an interim dividend of S$0.25 per share, just like the amounts paid in FY20 and FY21.
  • For FY22, we expect its dividend yield to be around 4%.

Targeting Higher Margin Products of the Future

  • Venture Corp will be moving towards higher-margin products – it will focus on several technology domains of the future that would be more profitable than its existing products. It also aims to ramp up its business in these areas over the next 5-10 years, from a low base currently. With the strong demand across all the sectors it supplies to, we expect margins to stay firm.
  • Despite rising costs, Venture Corp has shown that it has ridden these challenges well, which also highlights its strong customer ties. As a result, we maintain BUY on Venture Corp, with a higher target price of S$23.30 implying 19x FY22F P/E.
  • Using our in-house proprietary methodology, we derived an ESG Score of 3.0, which is around the median score for our Singapore coverage universe. As a result, we do not apply any discount or premium to our target Price for Venture Corp.

Source: RHB Invest Research - 8 Aug 2022

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Labels: Venture

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Chart Stock Name Last Change Volume 
Venture 16.38 -0.14 (0.85%) 1,308,900 

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