Brokers' take: Analysts positive on demand for Venture despite component shortages

VENTURE Corp V03 has been affected by component shortages in the half-year ended June this year, but analysts expect that the company should be able to mitigate the issue and see strong demand in its different customer domains.

In reports released on Aug 6, 9 and 10 respectively, CGS-CIMB, Maybank Kim Eng and RHB analysts all drew attention to the industry's ongoing component shortages.

CGS-CIMB analyst William Tng noted that the technology solutions provider's core net profit fell below his expectations and has cut his revenue expectations for 2021 to 2023 by 10.5 per cent to 14.6 per cent until component availability becomes clearer.

Thus, he maintained "add" on the company and revised down his target price for the company to S$21.32 from S$22.51 before.

Still, RHB analyst Jarick Seet liked that the company is taking steps to mitigate against the component shortages by fleshing out strategies to improve access to raw materials and enhance the assurance of supply.

"We expect Venture to be able to continue to navigate through these shortages efficiently, and complete a higher percentage of its order backlog in 2H21," he said.

Maybank KE analyst Lai Gene Lih also liked that Venture is redesigning the circuitry of products to use alternative components, and noted that the company is also set to launch a new platform of consumer electronics products which he believes to be Philiip Morris' Iqos Illuma, a heated tobacco product.

Furthermore, both Mr Lai and RHB's Mr Seet expect demand in new areas such as liquid chromatography, mass spectrometry and genomics to continue to be growth drivers for the company. In fact, Mr Seet noted that six out of Venture's seven main customer domains are still enjoying strong demand.

With new product launches, better operating efficiencies with increased revenues and higher design content, Mr Seet maintained "buy" on Venture with a target price of S$23.00, up from S$20.70 on the back of higher forecasted 2021 price to earnings ratio.

Maybank KE's Mr Lai maintained "buy" on the company with an increased target price of S$25.13, from S$22.00 as he remained confident in Venture's ability to overcome component shortages, as well as its stringent standard operating procedures that go beyond local requirements, reducing the risk of forced shutdowns.

Shares of Venture traded at S$19.67, up 1.39 per cent or S$0.27 as at 3.08pm.

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