Maintain BUY and SGD22.80 TP, 33% upside, with c.4% yield. Venture Corp reported a strong 1Q22, with revenue surging by 29.5% YoY to SGD889.3m and NPAT up 28.6% YoY to SGD84m – slightly above our expectations. Going forward, management anticipates steady demand across its various technology domains. We expect Venture to enjoy a positive FY22 despite supply chain challenges, as the group has shown that it can mitigate these disruptions.
Steady demand. Venture expects demand to be steady, based on customers’ orders and forecasts across its various technology domains – Lifestyle & Wellness, Life Sciences, Instrumentation, Test & Measurement Technology, and Advanced Industrial. Several new products were also introduced in 1Q22, and were well received by end-customers. Going forward, we expect further new product introductions in the remaining quarters, from existing and new customers.
Supply chain not a major issue. While there is still a shortage of some components, such as the Field Programmable Gate Arrays or FPGA, the shortage of other components is easing. Overall, management believes that while it is not completely out of the woods yet, it sees the situation improving. Its R&D lab team has also managed to redesign products to reduce the usage of some of these components which are facing shortages, and expanded the group’s capabilities to fulfil more orders. Although uncertainties in the operating environment will continue in the near term, we are confident that management will proactively monitor the situation and be ready to resolve these challenges as and when they arise – just as it was done in FY21 and 1Q22.
On track for a positive FY22F. With strong demand across the majority of its domains, we expect margins to remain strong. However, key component shortages may continue to hamper Venture’s ability to complete these orders. Nevertheless, as it was able to deliver a strong 1Q22 despite such shortages, we remain confident of Venture enjoying a strong rebound, while component shortages should also begin to ease through the course of 2022. The group has also shown that it is able to maintain its margins despite this inflationary period, which highlights the strong relationships it has with its customers. As a result, we maintain our BUY rating and TP of SGD22.80, pegged to 19x FY22F P/E. Using our in-house proprietary methodology, we derived an ESG score of 3.0, which is the median score for our Singapore coverage universe. As a result, we apply a 0% premium/discount to our TP.
