This is why it might be a good time to venture into Venture Corp | ZUU Investing Idea
Venture Corporation has been getting more attention recently, following its latest results announcement on Aug 8.
For 2Q2019, Venture’s group revenue fell 51% y-o-y to $903.5 million. Earnings fell 7.2% y-o-y to $90.9 million in the same period. The group also announced an interim dividend of 20 cents, in line with its maiden interim dividend announced in 1H2018.
Who is Venture Corporation?
Venture Corporation is a provider of technology services, products and solutions. That includes market research, design and development, product and process engineering, design for manufacturability, supply chain management, product refurbishment and technical support for high-mix, high-value and complex products. Venture Corp’s strongest capability lies in Original Design Manufacturing (ODM).
Founded in 1984 and headquartered in Singapore, the group consists of over 30 companies, located in Southeast Asia, Northeast Asia, America and Europe. Its clientele comprises of Fortune 500 companies and leading technology companies.
What do investors need to know about Venture Corporation and its results?
Market watchers noted that the revenue decline was well within expectation. “We note that Venture Corp’s global peers have been impacted by the trade war, and their financials have softened. As such, we expect profitability to be negatively impacted in the coming quarters,” said RHB Research analysts Jarick Seet and Lee Cai Ling.
For now, Venture Corp has performed reasonably well within the current environment. UOB Kay Hian’s analysts John Cheong and Joohijit Kaur pointed out that the group had managed to report a marginal 1.3% y-o-y revenue growth over the 6 month period. They believe it was driven by a “broad based growth” arising from its diversified portfolio of customers which protected the group from geopolitical and macro headwinds. “We believe several new projects that were started in 2H2018 also contributed to the growth”, they added.
What lies ahead for Venture Corporation?
“Management expects the volatile economic environment to persist, but has several initiatives in place to help it weather related near-term challenges,” said RHB’s Seet and Lee.
UOB Kay Hian’s Cheong and Kaur agrees. “Several new product launches is expected in late 3Q2019, such as in the test and measurement as well as the life sciences industry, as a result, we expect 4Q2019 to perform better than 3Q2019”
OCBC Research’s analysts are equally optimistic. “Venture Corp remains positive on opportunities within the life sciences/oncology space, given that these areas should exhibit more secular growth. We understand that most of its seven technology domains are growing (except advance payment solutions) with many customers’ solutions at the early stage of their growth curves.”
Maybank Kim Eng’s Lai Gene Lih says Venture Corp remains a top stock pick over a longer time horizon. “Venture Corp’s footprint for advanced manufacturing in Malaysia and Singapore is an advantage in the context of the US-China trade war, in our view. Venture Corps customers are also leveraged to exciting trends in genomics, food safety, and 5G infrastructure. This may cushion the impact of reduced corporate capex amid increasing cautiousness.”
Seet and Lee from RHB also added that the group is planning to work with its customers over a longer time frame, instead of on an ad hoc basis. On top of that, Venture Corp is planning to “develop several dynamic ecosystems, as well as serve new markets in selected technology domains”.
“Management believes this will broaden its value creation along multiple pathways to chart future growth”, says RHB’s analysts.
What should investors do about Venture Corporation?
RHB’s Seet and Lee have upgraded the stock to a “Buy”, with a target price of $16.30. UOB Kay Hian’s Cheong and Kaur have done the same, with a target price of $17.70.
OCBC Research has maintained its “Buy” with a lowered fair value of $18.42. It also cut Venture Corp’s FY19 earnings forecast by 5.9% to $369.7m, and cut FY20 earnings forecast by 5.1% to $387.8m.
DBS Research has maintained its “Buy” recommendation with a lower target price of $18.60. In a similar fashion, Maybank Kim Eng maintained its “Buy” recommendation with a lowered target price of $18.80.
Venture Corporation was trading at $15.112 on Aug 15.