Brokers’ take: Analysts positive on Venture Corp’s recovery amid upbeat outlook

ANALYSTS are positive on Venture Corporation : V03 0%’s steady demand outlook, noting that the company can likely ride on the growth momentum towards an earnings recovery after it posted stronger-than-expected financial results for its first quarter of 2022.

Phillip Securities Research upgraded its call on the counter to “buy” from “accumulate”, noting that its current share price offers a 5 per cent dividend yield with an attractive unlevered return on equity and a strong balance sheet.

Phillip's head of research Paul Chew maintained his target price of S$20, however, as he kept his estimates for the company’s FY2022 net profit as a buffer for the slowing macro environment.

Meanwhile, DBS Group Research lifted its target price to S$22.70 from S$22.60, as it raised its net earning estimates for FY2022 by 1 per cent amid a strong order momentum that is slightly offset by a higher tax rate.

DBS analyst Ling Lee Keng has a “buy” call on the counter, as she remains positive on Venture’s ability to attract quality customers.

Shares of the tech manufacturer were trading at S$18.09 at 10.50 am on Wednesday (May 4), up S$0.94 or 5.5 per cent.

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On Friday, Venture posted a 28.6 per cent increase in net profit to S$84 million for its first quarter ended March, from S$65.3 million a year ago.

Revenue also rose 29.5 per cent to S$889.3 million in Q1 on the back of broad-based growth across most of its technology domains, with Venture anticipating a steady demand outlook based on its customers’ orders and forecasts.

Noting that the results beat estimates, Phillip’s Chew expects FY2022 will be a recovery year for Venture amid the broad-based growth, as well as order visibility as customers make longer-term commitments to ensure supply.

Venture should also see a rebound from its factory shutdown in Malaysia, and gain from more traction for its new products in life science and lifestyle and wellness, Chew said.

Maybank analyst Lai Gene Lih has also said the results beat expectations and expects Venture will recover towards pre-Covid levels in FY2022.

Lai, who has a “buy” call and target price of S$21 on the counter, noted that this contrasts other tech plays globally where demand slowdown is a key concern.

Meanwhile, DBS’s Ling also projects revenue will reach pre-pandemic levels, but she noted that net margins may be lower amid supply chain disruptions, inflationary pressure and higher tax rates.

Regardless, RHB analyst Jarick Seet expects Venture can mitigate supply chain disruptions and maintain its margins despite this inflationary period, given its track record. He also expects component shortages will begin to ease through the year.

Seet has a “buy” call and target price of S$22.80 on the counter.

On top of the positive demand outlook, UOB Kay Hian analyst John Cheong noted that recent share purchases from Venture’s executive chairman may be a positive signal for the company.

In November 2021, Venture’s largest shareholder and executive chairman Wong Ngit Leong had acquired 200,000 Venture shares at S$18.73 each.

Cheong, who has a “buy” call and target price of S$22.80 on the counter, noted that Wong’s previous acquisition of 566,300 shares in 2017 had turned out to be a strong positive signal as Venture’s share price hit an all-time high in 2018.