Brokers' take: DBS initiates Grand Venture with 'buy' on positive outlook across segments

GRAND Venture Technology : JLB 0% (GVT) is likely "well-poised" to gain from the positive industry outlook on all 3 of its segments, which includes the semiconductor, life sciences, and electronics and medical segments, said DBS Group Research.

The research team on Thursday (Apr 14) initiated coverage on the precision manufacturing company with a "buy" call and target price of S$1.50, as it assumes revenue will grow by 25 per cent in FY2022 and 22.5 per cent in FY2023.

The target price, pegged to 18 times the brokerage's estimates for FY2023 earnings, is likely "justified" amid GVT's ability to benefit from industry growth.

DBS said while GVT appears to be trading at a premium compared to its peers, it is undervalued when taking into account the expected growth rate of its earnings per share.

Shares of GVT were trading at S$1.01 at 1.40 pm on Thursday, up S$0.045 or 4.7 per cent.

GVT's semiconductor segment, which is its largest contributor to revenue, will likely benefit from the global push towards digitalisation, with areas such as 5G, autonomous vehicles and artificial intelligence supporting the semiconductor industry.

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GVT currently services 4 of the top semiconductor players in the back-end space and is planning to expand its products offerings for front-end players, the research team noted.

Its life sciences segment should also gain from an increase in research and development in the pharmaceutical industry, while demand for the mass spectrometer component is likely supported by the food safety testing market.

As for its electronics, medical and others segment, an increase in minimally invasive surgeries should boost surgical microscope demand.

DBS noted that GVT has been expanding in the last 2 years, and the acquisition of new facilities and new capabilities should allow GVT to ramp up production and drive future growth.

The possibility of future acquisitions especially in advanced materials such as quartz, ceramics and engineering plastics may also strengthen the competitive positioning of GVT, the research team said.

Going forward, DBS expects GVT to maintain its FY2021 net margin of 15.1 per cent, which jumped from 8.5 per cent in FY2020, supported by expanding capacity and revenue.

GVT posted net profit of S$17.6 million for its financial year 2021, from S$5.2 million a year ago. Previously listed on the Catalist board of the Singapore Exchange, it transferred to the mainboard in November 2021.

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