Brokers' take: RHB upgrades Venture Corp to 'buy' on recent share price weakness

RHB on Tuesday upgraded its call on Venture Corporation to "buy" from "neutral", while raising its target price to S$20.70 from S$19.60 previously to imply an 11 per cent upside and 4 per cent yield.

This comes after the mainboard-listed technology solutions provider's recent share price weakness, which analyst Jarick Seet said he considered unwarranted given the stock's favourable fundamentals as well as expectations of stronger Q2 FY2021 financials.

In his view, Venture's recent share price dip represents a good opportunity to accumulate on what the analyst deems a tech laggard at an attractive level.

He also likes the stock for its recent aversion of most manpower issues brought on by Malaysia's movement control order directives, which imposed a 50-60 per cent workforce limit per site. Mr Seet highlights that the restrictions were anticipated by the company in May this year, prompting it to form a taskforce of internal personnel to formulate mitigating action plans.

Noting consistent recovery in terms of Venture's profitability over all four quarters of FY2020, Mr Seet sees this trend continuing well into FY2021 supported by broad-based strength across the group's customers in both existing and new segments.

New products and solutions to be released to end-markets in the second and third quarters of 2021 include fast-growing domains and ecosystems including life science and genomics, healthcare and wellness, as well as Covid-19 related detection, testing, and diagnostic products and solutions, observed the analyst.

"Demand for medical devices and equipment, networking and communications, and semiconductor-correlated modules and equipment also appear unabated. These areas of growth will likely carry forward into FY2021," he said.

Mr Seet views Venture's last-declared FY2020 payout of S$0.75 as "highly sustainable", and believes shareholders stand to enjoy higher dividends if the group continues to improve.

"We do think that FY2021 will be a better year with an earnings per share growth of 11.8 per cent," he added.

Shares of Venture ended Tuesday S$0.12 or 0.64 per cent higher at S$18.83.