Recovery Continues; Maintain BUY

• Venture Corp (SGX:V03)'s 2H20 PATMI of S$166.8m (-8.1% y-o-y) was in line with our estimate, and met the lower end of street’s.
• We trim our Venture Corp's FY21-22E earnings per share forecasts by 4-5% to fine-tune margin assumptions, although our revenue numbers are largely unchanged – reflecting our confidence of the ongoing recovery. New products are on track for launch in 2Q21 and into 2H21.
• Maintain BUY with lower target price of S$22.00 on unchanged 18.5x FY21E P/E (1.5 standard deviation above 4-year mean).

Resilient Revenue and Margins From Diversity

• Venture Corp's 2H20 revenue fell 8.6% y-o-y to S$1.65b, although this was up 20.6% h-o-h. Several end-markets were affected by COVID-19, particularly those facing retail end-markets (e.g. POS, consumer electronics), but this was offset by resilience in life-science, networking and communication and semicon, which are beneficiaries in the pandemic.
• As Venture Corp’s value-add is higher in the life-science domain, net margin was flat y-o-y at 10.1% despite lower volumes.

Leveraging R&D to Capture Opportunities

• Growth in the life science domain is expected to be driven by genomics-related products and advanced equipment for analysis/ diagnostics in biological systems. COVID-19 also presents opportunities to develop pandemic-related testing and diagnostic products.
• Venture Corp says it is leveraging its R&D capabilities to develop cutting-edge products in life science, medical devices and lifestyle and wellness consumer products.

Moving Into Interesting Domains

• Venture Corp will widen its participation in robotics, automation and AI, and advanced semiconductor equipment domains.
• Venture Corp is also optimistic in being able to capture value in adjacent domains, such as battery EVs, through its breadth of know-how across multiple domains.
• We believe key risks are:
  1. outbreak of COVID-19 in Venture Corp’s plants, which may hinder production schedules;
  2. chip shortages within supply chains Venture Corp are exposed to; and
  3. slower-than-expected economic recovery.

Source: Maybank Kim Eng Research - 1 Mar 2021