Brokers' take: CGS-CIMB raises Grand Venture target price on semiconductors-driven Q1 earnings surge

CGS-CIMB raised its target price for Grand Venture Technology to S$1.12, almost double from S$0.605 previously, while maintaining its "add" call.

This follows a voluntary business update earlier in the month, Grand Venture's first since its listing on the Singapore Exchange in January 2019, where it posted a 434.9 per cent increase in net profit to S$3.3 million for the first quarter of 2021, compared to the same period a year ago.

CGS-CIMB analyst William Tng noted that the amount was also higher than H1 2020's net profit of S$2.2 million.

Revenue in Q1 2021 grew by 59 per cent, led by the semiconductor segment, he said, which saw a revenue increase of 68.5 per cent year on year and contributed 70.6 per cent of revenue. The growth was driven by a global ramp-up in demand for semiconductor chips.

The other contributors, the life sciences segment and the electronics, medical and others segment, also saw significant year-on-year revenue growths of 38.4 per cent and 42.2 per cent respectively.

The life sciences segment benefited from higher production upon receiving customers' qualification, while Grand Ventures' electronics, medical and others segment benefited from contribution from a customer involved in surgical microscopes, Mr Tng said.

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The analyst added that no vendor shares were sold in Grand Venture's initial public offering in January 2019, and it raised S$23.5 million in net proceeds in March this year from its placement to Novo Tellus.

The group will continue to gain competencies in advanced manufacturing and grow through mergers and acquisitions, he said. CGS-CIMB has raised estimates for revenue in FY2021-FY2023.

Mr Tng said that, as seen in the revenue jump and sub-classifications of non-semiconductor segments, "efforts to onboard new customers and products in the past two years are starting to bear fruit in FY2021."

"We believe a new chapter of growth is unfolding at Grand Ventures," he said.

On Monday, shares of Grand Venture Technology closed up 12.2 per cent to 82.5 Singapore cents.