• Maintain BUY with an unchanged TP of SGD22.80, 34% upside and c.4% yield. We believe that its upcoming 1Q22 results should be positive due to the its backlog from 4Q21, strong demand across most of its segments, and coupled with the component shortages slowly easing. We expect Venture Corp to report a NPAT of SGD78-82m for 1Q22F despite the lockdown in Shanghai. With a positive outlook ahead, we maintain BUY on Venture.

• Navigating through component shortages. A number of component types - such as the Field Programmable Gate Arrays (FPGA) – continue to face shortages right now. Other components are seeing the situation easing. Overall, management thins the company is not completely out of the woods yet but do see the situation improving. Several task forces have been established in prior years to manage these disruptions and have managed to get more components from existing and new suppliers. The company’s R&D team also managed to redesign products to reduce usage of some components which are facing shortages. This allowed Venture to grow more revenue than before due to their strong innovation and value- add.

• Robust demand coupled with backlog from 4Q21. Venture anticipates a robust demand outlook based on customer’s orders and forecasts across various technology domains especially in the semiconductors space. In the life science domain, demand for products in the area of analytical instruments remains strong. Positive market momentum is also visible across instrumentation, test and measurement, networking and communications as well as advanced industrials domains where several new product introductions (NPIs) are also expected. Customers in the lifestyle and wellness sectors have provided a positive demand guidance. There is also a leftover backlog from 4Q21 to be completed in FY22F. As a result, we do think that FY22F will enjoy a stronger performance than the one in the previous year.

• A better FY22F ahead. With the strong demand across the majority of its domains, we expect margins to continue to remain strong. However, key component shortages may continue to hamper Ventrue’s ability to complete these orders. Nevertheless, the company was able to deliver a strong 4Q21 despite such shortages. Therefore, we remain confident of Venture enjoying a strong rebound while component shortages also begin to slowly ease through the course of FY22. As a result, we maintain BUY on Venture with an unchanged TP of SGD22.80, pegged to a 19x FY21F PE. Using our in- house proprietary methodology, we derived an ESG Score of 3.0, which is equal to the median 3.0 score for our Singapore coverage universe. As a result, we do apply a 0% discount to our TP.

Source: RHB Research - 26 Apr 2022