Venture Corp (VMS) reported a 8.1% YoY decline in its 3Q12 PATMI to S$32.6m despite revenue increasing 4.3% to S$608.9m. Topline was within our expectations, although bottomline missed due to weaker-than-expected margins. For 9M12, revenue of S$1,795.0m (-0.3%) and PATMI of S$101.7m (-14.2%) formed 72.7% and 67.7% of our FY12 estimates, respectively. The general sentiment among VMS’s customers remains weak in the near-term, but we believe that its product pipeline from both new and existing customers would yield more meaningful contribution in FY13. While we pare our FY12 revenue and PATMI estimates by 1.6% and 9.1%, respectively, we leave our FY13 forecasts intact. We opine that investors should position themselves for the expected recovery in VMS’s business in FY13, and hence roll forward our valuations to 15x FY13F EPS. This raises our fair value estimate from S$8.72 to S$9.22. Coupled with an attractive FY12F dividend yield of 7.1%, we maintain our BUY rating.
3Q12 revenue in line but PATMI fell short
Venture Corp (VMS) reported a 4.3% YoY increase in its 3Q12 revenue to S$608.9m but PATMI declined by 8.1% to S$32.6m. Topline was within our expectations but bottomline missed due to weaker-than-expected margins. PATMI was also boosted by a S$1.6m gain on disposal of an associate, although this was partially offset by exchange losses amounting to S$1.1m. Sequentially, revenue and PATMI fell by 0.5% and 3.1%, respectively. For 9M12, revenue of S$1,795.0m was marginally lower by 0.3% and formed 72.7% of our FY12 projections. PATMI dipped 14.2% to S$101.7m, or 67.7% of our full-year estimates.
End market demand remains tepid
VMS highlighted that the sentiment amongst its customers remains cautious, given the weak end market demand in light of the ongoing macroeconomic uncertainties. We pare our FY12 revenue and PATMI estimates by 1.6% and 9.1%, respectively, as the seasonal 2H strength is unlikely to materialise this year. Our FY13 forecasts are unchanged.
BUY rating premised on 7.1% yield and recovery in FY13
Nevertheless, management sounded more upbeat about its FY13 product pipeline from both new and existing customers, and is seeking to further increase its market share gains from competitors with these customers. This would however only yield meaningful contribution in FY13. We opine that investors should position themselves for the expected recovery in VMS’s business in FY13, and hence roll forward our valuations to 15x FY13F EPS. This raises our fair value estimate from S$8.72 to S$9.22. We also expect VMS to maintain its attractive DPS of 55 S cents in 4Q12 (FY12 yield of 7.1%) despite our projected 12.7% decline in its FY12F PATMI. This is supported by its strong free cashflows generation (9M12: S$86.6m). Current net cash balance stands at S$264.4m, or 12.5% of its market capitalisation. Maintain BUY.
Venture Corp (VMS) reported a 4.3% YoY increase in its 3Q12 revenue to S$608.9m but PATMI declined by 8.1% to S$32.6m. Topline was within our expectations but bottomline missed due to weaker-than-expected margins. PATMI was also boosted by a S$1.6m gain on disposal of an associate, although this was partially offset by exchange losses amounting to S$1.1m. Sequentially, revenue and PATMI fell by 0.5% and 3.1%, respectively. For 9M12, revenue of S$1,795.0m was marginally lower by 0.3% and formed 72.7% of our FY12 projections. PATMI dipped 14.2% to S$101.7m, or 67.7% of our full-year estimates.
End market demand remains tepid
VMS highlighted that the sentiment amongst its customers remains cautious, given the weak end market demand in light of the ongoing macroeconomic uncertainties. We pare our FY12 revenue and PATMI estimates by 1.6% and 9.1%, respectively, as the seasonal 2H strength is unlikely to materialise this year. Our FY13 forecasts are unchanged.
BUY rating premised on 7.1% yield and recovery in FY13
Nevertheless, management sounded more upbeat about its FY13 product pipeline from both new and existing customers, and is seeking to further increase its market share gains from competitors with these customers. This would however only yield meaningful contribution in FY13. We opine that investors should position themselves for the expected recovery in VMS’s business in FY13, and hence roll forward our valuations to 15x FY13F EPS. This raises our fair value estimate from S$8.72 to S$9.22. We also expect VMS to maintain its attractive DPS of 55 S cents in 4Q12 (FY12 yield of 7.1%) despite our projected 12.7% decline in its FY12F PATMI. This is supported by its strong free cashflows generation (9M12: S$86.6m). Current net cash balance stands at S$264.4m, or 12.5% of its market capitalisation. Maintain BUY.
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