Venture Corp (VMS) reported a sluggish set of 1Q13 results which came in below ours and the street’s expectations. Revenue fell 7.6% YoY to S$530.5m, forming 20.6% of our full-year estimate. PATMI fared worse, dipping 21.1% YoY to S$28.0m, or just 16.9% of our original FY13 forecast. Management sounded cautious during the analyst briefing, given the still uncertain macroeconomic environment. We believe that VMS’s 2H strength would be weaker than our previous expectations. We expect some near term selling pressure on the stock given this lacklustre set of results and also because the stock trades ex-dividend today (2 May, from 9 a.m.). We cut our FY13 revenue forecasts by 5.7% (FY14 by 4.8%) and our PATMI estimates by 11.9% (FY14 by 5.4%). Consequently, our fair value estimate is lowered from S$9.08 to S$8.00 (15x FY13F EPS). Downgrade VMS from Buy to HOLD.
1Q13 results fell short of expectations
Venture Corp (VMS) reported a sluggish set of 1Q13 results which came in below ours and the street’s expectations. Revenue fell 7.6% YoY to S$530.5m, forming 20.6% of our full-year estimate (20.3% of Bloomberg consensus). Its topline was partly impacted by a 2.7% YoY depreciation of the USD vis-à-vis the SGD. PATMI fared worse, dipping 21.1% YoY to S$28.0m, or just 16.9% of our original FY13 forecast (16.7% of Bloomberg consensus). This was largely due to a reduction in sales, significantly lower share of profit of associates and an income tax expense of S$0.5m, versus a S$1.7m income tax benefit in 1Q12.
Macro uncertainties a dampener, pickup in 2H still expected
Although we continue to believe that FY13 would remain a backend loaded year for VMS given the ramp up of new programmes for newly acquired and existing customers, the ongoing vagaries in the macroeconomic landscape pose downside risks to our previous expectations. Management also sounded cautious during the analyst briefing, as its customers’ end market demand is likely to remain tepid in the near term. Nevertheless, VMS will continue to strive on gaining market share from existing customers, supported by its technological know-how and focus on service excellence. It will also seek to win new programmes and customers in areas with potentially strong growth prospects such as 3D printing and life sciences.
Pare FV and downgrade to HOLD
We expect some near-term selling pressure on the stock given this lacklustre set of results and also because the stock trades ex-dividend today (2 May, from 9 a.m.). The S$0.50 DPS translates into a yield of 6.0% and is payable on 15 May 2013. We cut our FY13 revenue forecasts by 5.7% (FY14 by 4.8%) and our PATMI estimates by 11.9% (FY14 by 5.4%). Consequently, our fair value estimate is lowered from S$9.08 to S$8.00, still pegged to 15x FY13F EPS. Downgrade VMS from Buy toHOLD.
Venture Corp (VMS) reported a sluggish set of 1Q13 results which came in below ours and the street’s expectations. Revenue fell 7.6% YoY to S$530.5m, forming 20.6% of our full-year estimate (20.3% of Bloomberg consensus). Its topline was partly impacted by a 2.7% YoY depreciation of the USD vis-à-vis the SGD. PATMI fared worse, dipping 21.1% YoY to S$28.0m, or just 16.9% of our original FY13 forecast (16.7% of Bloomberg consensus). This was largely due to a reduction in sales, significantly lower share of profit of associates and an income tax expense of S$0.5m, versus a S$1.7m income tax benefit in 1Q12.
Macro uncertainties a dampener, pickup in 2H still expected
Although we continue to believe that FY13 would remain a backend loaded year for VMS given the ramp up of new programmes for newly acquired and existing customers, the ongoing vagaries in the macroeconomic landscape pose downside risks to our previous expectations. Management also sounded cautious during the analyst briefing, as its customers’ end market demand is likely to remain tepid in the near term. Nevertheless, VMS will continue to strive on gaining market share from existing customers, supported by its technological know-how and focus on service excellence. It will also seek to win new programmes and customers in areas with potentially strong growth prospects such as 3D printing and life sciences.
Pare FV and downgrade to HOLD
We expect some near-term selling pressure on the stock given this lacklustre set of results and also because the stock trades ex-dividend today (2 May, from 9 a.m.). The S$0.50 DPS translates into a yield of 6.0% and is payable on 15 May 2013. We cut our FY13 revenue forecasts by 5.7% (FY14 by 4.8%) and our PATMI estimates by 11.9% (FY14 by 5.4%). Consequently, our fair value estimate is lowered from S$9.08 to S$8.00, still pegged to 15x FY13F EPS. Downgrade VMS from Buy toHOLD.
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