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Broker's Take: CIMB expects Venture to beat consensus on FY17 results, raises target price

CIMB has raised its target price on electronics provider Venture Corporation from S$24.74 to S$29.13, and maintained its "add" rating on the stock as it believes the company is on track for a strong finish to FY17.

This new target represents a 30.7 per cent upside to Venture's current share price of S$22.29 as at Feb 7.

Analysts from CIMB expect Venture to beat FY17 consensus forecasts when the company reports its financial results on Feb 28.

"Preliminary estimates released by the US government showed that the nation's output increased at an annual rate of 2.6 per cent in Q4 FY17. With many of Venture's customers being US corporates... we believe FY17 consensus net profit of S$327.8 million will be beaten, and have raised our FY17 net profit forecast by 5.1 per cent to S$352.5 million," they said.

On Jan 18, Venture announced the acquisition of a freehold property located in California, USA, for US$29.4 million. This is Venture's first substantial investment in the US, and represents the firm's commitment to augment its cluster of excellence in the US, CIMB said.

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Upon completion of the acquisition, Venture intends to renovate the facility to meet its objective of offering a new platform enterprise to forge new alliances that will allow the group to take part in advanced new technologies and businesses from US corporates, driving further growth.

In addition, the broker noted that investors should also watch for signalling effects from Venture's FY17 dividend payout.

"Venture is likely to pay a higher dividend per share (DPS) when FY17 results are announced. We have assumed that DPS will be S$0.60 (S$0.50 per its track record, and S$0.10 arising from the sale of its stake in an investment). Terming it a final DPS would lend further support to our optimistic earnings forecast."

Nonetheless, CIMB also noted that downside risks include a slowdown in customer orders, and weaker USD against the Sing dollar.

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