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Hot Stock: Venture shares up 11% in early session

SHARES in electronics manufacturing services firm Venture Corp started the week on a high, trading S$1.85 or 11 per cent higher at S$18.70, with about 2.8 million shares changing hands as at 11.27am. 

The climb comes as the mainboard-listed company posted a net profit of S$97.9 million for the second quarter on Friday, up 40.2 per cent from the same period a year earlier. The increase in net profit came despite a 6 per cent fall in gross revenue to S$952.3 million.

It also announced a surprise interim dividend of 20 Singapore cents a share, payable on Sept 19. The last time Venture rewarded shareholders with a special dividend was in 2007, when earnings last peaked.

Analysts have also chimed in on Venture, with OCBC Investment Research maintaining its "buy" call but lowering its fair value for Venture to S$23.23. Meanwhile, CGS-CIMB and UOB Kay Hian maintained their "hold" call on the company's stock and have maintained their target price at S$17.83 and S$18.20 respectively.

CGS-CIMB analyst William Tng said: "We believe Venture will accelerate its efforts in creating clusters of excellence while growing existing ones. Venture’s focus on expanding its research and development (R&D) capabilities, transformational engineering and operational excellence continues to underpin the group’s ability to gain traction and deepen its collaborative partnerships with leaders in fast-growing domains of interest."

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OCBC Investment Research analyst Joseph Ng said: "The group’s growing R&D expenses typically translate into firmer margins, while the group’s tight customer collaboration should help to create longer term value."

While Venture posted good results, UOB Kay Hian analyst Foo Zhi Wei noted that it has not addressed some key issues, such as flagging electronic cigarette production, a slowdown in the production outlook and why Venture feels that net margins of 10 per cent are sustainable.

"While we appreciate that Venture is evolving for the better, transformations do not happen overnight, and rarely without some short-term setbacks, he added.

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