Brokers’ take: CGS-CIMB upgrades Grand Venture to ‘hold’ on new business prospects

CGS-CIMB has upgraded Grand Venture Technology : JLB 0% from “reduce” to “hold”, on expectations of the mainboard-listed company continuing to make “good progress” in onboarding new customers.

The research house revised its target price to S$0.52, up from S$0.40 previously.

CGS-CIMB analysts noted on Friday (Jan 6) that Grand Venture’s efforts to court prospective customers in the front end of the semiconductor chain could be starting to bear fruit.

The analysts said that they expect to see revenue contribution from those customers in the second half of FY2023.

Grand Venture’s semiconductor business made up 58 per cent of its revenue for the nine months ended Sep 30, 2022.

In terms of capacity, the analysts pointed to Grand Venture’s Penang facility as having sufficient means to absorb new orders in the near future.

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They added: “If (Grand Venture) is successful in developing its business with these customers, we think there could be a need for further capacity expansion in the next one to two years.”

Meanwhile, the analysts do not expect Grand Venture’s production activities in China to be materially impacted, even as cases surge in the world’s second-largest economy.

CGS-CIMB derived its target price of S$0.52 on a price-to-earnings multiple of 10.4 times Grand Venture’s forecasted earnings in FY2024. The new multiple represents half a standard deviation point below the stock’s historical three-year average.

Shares of Grand Venture were up 1 per cent or S$0.005 to S$0.525 on Friday, as at 11.45 am.