• Maintain BUY, new TP of SGD23.30 from SGD22.80, 31% upside with c.4% FY22F yield. Venture reported robust 1H22 numbers, with revenue up 25.4% YoY to SGD906.8m and NPAT surging by 24.1% YoY to SGD90.2m – 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 by 2% to SGD353m, which results in a new and higher TP (pegged to 19x FY22F P/E).

• No halt to demand in 2H22F. The company 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. 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 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 its 2H22 results, if the current condition is unchanged.

• 1H22 interim DPS of SGD0.25. Management declared an interim dividend of SGD0.25 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 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 has shown that it has ridden these challenges well, which also highlights its strong customer ties. As a result, we maintain BUY on this counter, with a higher TP of SGD23.30 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 TP.

Source: RHB Research - 8 Aug 2022