Venture Corp (VMS) reported a solid 11.6% YoY jump in its 2Q14 PATMI to S$33.5m on the back of a 2.3% growth in revenue to S$601.1m. This was within our expectations. We believe VMS’s 2H14 seasonal strength will pan out in accordance to our expectations. Encouragingly, management highlighted that the business sentiment of most of its customers has been generally positive. However, it cautioned that the continued M&A and consolidation activities among some of its customers may result in some near-term uncertainties. Given VMS’s recent robust share price performance, we believe the positives from recent strong global manufacturing PMI data points and VMS’s continued recovery momentum have been priced in by the market. Despite an attractive forecasted FY14F dividend yield of 6.2%, we believe total potential returns are now limited. Hence, we downgrade VMS to HOLD on valuation grounds, with an unchanged fair value estimate of S$8.24.
2Q14 results within our expectations
Venture Corp (VMS) reported a solid 11.6% YoY jump in its 2Q14 PATMI to S$33.5m on the back of a 2.3% growth in revenue to S$601.1m. This was within our expectations. On a segmental basis, VMS recorded a 17.9%, 5.7% and 2.8% YoY decline in sales from its Computer Peripherals & Data Storage, Printing & Imaging and Retail Store Solutions & Industrial Products divisions to S$55.6m, S$67.8m and S$181.1m, respectively. However, this was offset by good revenue growth in its Test & Measurement/Medical/Others (+18.4% YoY) and Networking & Communications (+4.6%) segments. Bottomline grew more strongly than topline due to good cost control. For 1H14, revenue climbed 6.6% to S$1,192.1m, forming 48.5% of our FY14 forecast. PATMI rose 10.7% to S$64.3m, or 45.1% of our full-year estimate. We are expecting VMS’s 2H14 seasonal strength to pan out in accordance to our expectations.
Sentiment amongst customers positive in general
Encouragingly, management highlighted that the business sentiment of most of its customers has been generally positive, thus leading to stronger order projections in 2H. VMS also does not foresee any margin erosion in the foreseeable future. However, it cautioned that the continued M&A and consolidation activities among some of its customers may result in some near-term uncertainties. These include Agilent Technologies’ split into two publicly traded companies (both of which will remain as customers of VMS), the recent Honeywell acquisition of Intermec and Oracle’s ongoing takeover exercise of Micros Systems.
Retain forecasts and FV, but downgrade to HOLD
VMS’s share price has appreciated 7.8% since we upgraded the stock to a ‘Buy’ on 12 Jun 2014, outperforming the STI’s flat performance during the same period. We believe the positives from recent strong global manufacturing PMI data points and VMS’s continued recovery momentum have been priced in by the market. Despite an attractive forecasted FY14F dividend yield of 6.2%, we believe total potential returns are now limited. Hence, we downgrade VMS to HOLD on valuation grounds, with an unchanged fair value estimate of S$8.24 (15x blended FY14/15F EPS).
Venture Corp (VMS) reported a solid 11.6% YoY jump in its 2Q14 PATMI to S$33.5m on the back of a 2.3% growth in revenue to S$601.1m. This was within our expectations. On a segmental basis, VMS recorded a 17.9%, 5.7% and 2.8% YoY decline in sales from its Computer Peripherals & Data Storage, Printing & Imaging and Retail Store Solutions & Industrial Products divisions to S$55.6m, S$67.8m and S$181.1m, respectively. However, this was offset by good revenue growth in its Test & Measurement/Medical/Others (+18.4% YoY) and Networking & Communications (+4.6%) segments. Bottomline grew more strongly than topline due to good cost control. For 1H14, revenue climbed 6.6% to S$1,192.1m, forming 48.5% of our FY14 forecast. PATMI rose 10.7% to S$64.3m, or 45.1% of our full-year estimate. We are expecting VMS’s 2H14 seasonal strength to pan out in accordance to our expectations.
Sentiment amongst customers positive in general
Encouragingly, management highlighted that the business sentiment of most of its customers has been generally positive, thus leading to stronger order projections in 2H. VMS also does not foresee any margin erosion in the foreseeable future. However, it cautioned that the continued M&A and consolidation activities among some of its customers may result in some near-term uncertainties. These include Agilent Technologies’ split into two publicly traded companies (both of which will remain as customers of VMS), the recent Honeywell acquisition of Intermec and Oracle’s ongoing takeover exercise of Micros Systems.
Retain forecasts and FV, but downgrade to HOLD
VMS’s share price has appreciated 7.8% since we upgraded the stock to a ‘Buy’ on 12 Jun 2014, outperforming the STI’s flat performance during the same period. We believe the positives from recent strong global manufacturing PMI data points and VMS’s continued recovery momentum have been priced in by the market. Despite an attractive forecasted FY14F dividend yield of 6.2%, we believe total potential returns are now limited. Hence, we downgrade VMS to HOLD on valuation grounds, with an unchanged fair value estimate of S$8.24 (15x blended FY14/15F EPS).
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