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Hot stock: Venture shares down 10% after posting 27.5% fall in Q3 profit

SHARES in mainboard-listed Venture Corp have shaved off 9.9 per cent during trading in Monday's early session, with the electronics manufacturing services provider's stock declining S$1.61 to S$14.65 as at 10.55am. It was the Singapore bourse's biggest loser in early trading.

The dive comes on the back of Venture's third-quarter earnings posted on Friday after market closure.

For the quarter ended Sept 30, Venture's net profit fell 27.5 per cent to S$80.8 million from the preceding year, missing street estimates. Meanwhile, revenue fell 27.4 per cent to S$770.4 million, mainly attributable to the impact arising from customers' planned transition to new replacement products and some customers' merger and acquisition (M&A) activities for the reported quarter.

Analyst reports released on Monday suggest that the recent dip in the share's price presents a buying opportunity for investors.

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RHB Research Institute's Jarick Seet and Lee Cai Ling have maintained a "buy" call on Venture, but lowered its target price to S$19.00 from S$22.20.

The analysts said: "The same factors causing a slowdown in Q3 will likely contribute positively to a V-shaped recovery in Q4, as these new production introductions will likely occur in Q4. Venture also secured a few new customers, which will likely contribute to revenue growth in Q4."

They added: "We think that the negative results may trigger short-term selling pressure – but this is likely to present investors with opportunities to accumulate the stock." RHB expects Venture to dish out a distribution per share of 70 Singapore cents this year, up from the previous year.

While US-China trade relations have weighed on Venture's performance, its management noted that talks are underway to move production from customers’ plants in China to Venture’s facilities in Malaysia and Singapore. Venture's management also added that its new customers from the US, who would usually source for products in China are participating in this supply migration process. This could see production from Venture's facilities in Malaysia and Singapore from the first quarter of 2019.

OCBC Investment Research's Joseph Ng said: "We are also encouraged to note that despite the macro rumblings, feedback on customer sales has been encouraging till date, with purchase orders backing up this optimism."

The brokerage has maintained its "buy" call on Venture, but has lowered the stock's fair value to S$20.13 from S$23.23 on a more conservative earnings estimate for fiscal 2018 and 2019.

Maybank Kim Eng has also maintained its "buy" call with a target price of S$22.23.

Meanwhile, DBS Group Research's Carmen Tay said: "While Venture has been penalised by the market over the lack of clarity in its underlying business profile, positive steps taken to improve transparency and communication – evidenced by rare disclosures made in its outlook statement this quarter – signals a brighter future. This, which should help reinstate investor confidence despite the temporary earnings blip."

Ms Tay maintained her "buy" call but like other brokers, lowered Venture's target price to S$21.30 from S$22.90 but she remains confident in "Venture’s ability to deliver sustainable long-term growth ahead".