The World Semiconductor Trade Statistics (WSTS) reported that the world semiconductor market grew 9.9% to US$336b in 2014, mainly driven by 18.2% growth in memory product category as annual sales increased across all geographical regions. WSTS goes on to forecast steady but moderate growth of 4.9% to US$352b and 3.1% to US$363b in 2015 and 2016, respectively, for all product categories and regions. In the longer-term, IDC forecasts a CAGR of 3.1% from 2014 to 2019, reaching US$389b in 2019. On these data, we have reasons to believe the industry outlook remains positive over the next few years on moderate growth projections. As we think VMS has more room to grow in its TMO segment, our current assumptions forecast for 10.2% and 9.2% growth in FY15 and FY16 PATMI, respectively. Consequently, our FV remains unchanged at S$8.41. But given that the share price has increased steadily to S$8.53, we downgrade VMS to HOLD on valuation grounds.
World semiconductor market grew 9.9% in 2014
The World Semiconductor Trade Statistics (WSTS) reported that the world semiconductor market grew 9.9% to US$336b in 2014, mainly driven by 18.2% growth in memory product category. Annual sales increased across all geographical regions – Americas (12.7%), Asia Pacific (11.4%), Europe (7.4%) and Japan (0.1%). Market watcher IDC reported the PC market declined 0.8% in 2014. Accordingly, Venture Corp (VMS) also reported a 5.8% growth in its FY14 revenue, mainly driven by a 23.4% growth in its test & measurement/medical & life science/others (TMO) segment, which more than offset the 17.5% drop in revenue from computer peripherals & data storage segment. Note that VMS management had earlier guided they expect growth to be driven by the TMO segment going forward, especially from the medical & life science area.
Industry outlook still positive
WSTS goes on to forecast steady but moderate growth of 4.9% to US$352b and 3.1% to US$363b in 2015 and 2016, respectively, for all product categories and regions. Automotive and communications segments are likely the main growth driver going forward. IDC also forecasted for more moderate growth of 3.6% in 2015, as the DRAM (memory) market stabilizes. In the longer-term, IDC forecasts a CAGR of 3.1% from 2014 to 2019, reaching US$389b in 2019. The trend going forward is likely a decline in the PC market but tremendous growth in the smart devices (i.e. smartphones) market. And according to IDC, IT investment by the Western European healthcare sector is forecasted to grow 10.6% to US$14.6b by 2018. Separately, Gartner projects a 6% growth in IT spending in Southeast Asia region to reach US$52b in 2015 and US$62b by 2018.
Downgrade to HOLD on valuation grounds
On these data, we have reasons to believe the industry outlook remains positive over the next few years. As we think VMS has more room to grow in its TMO segment, our current assumptions forecast for 10.2% and 9.2% growth in FY15 and FY16 PATMI, respectively. Consequently, our FV remains unchanged at S$8.41. But given that the share price has increased steadily to S$8.53, we downgrade VMS to HOLD on valuation grounds.
The World Semiconductor Trade Statistics (WSTS) reported that the world semiconductor market grew 9.9% to US$336b in 2014, mainly driven by 18.2% growth in memory product category. Annual sales increased across all geographical regions – Americas (12.7%), Asia Pacific (11.4%), Europe (7.4%) and Japan (0.1%). Market watcher IDC reported the PC market declined 0.8% in 2014. Accordingly, Venture Corp (VMS) also reported a 5.8% growth in its FY14 revenue, mainly driven by a 23.4% growth in its test & measurement/medical & life science/others (TMO) segment, which more than offset the 17.5% drop in revenue from computer peripherals & data storage segment. Note that VMS management had earlier guided they expect growth to be driven by the TMO segment going forward, especially from the medical & life science area.
Industry outlook still positive
WSTS goes on to forecast steady but moderate growth of 4.9% to US$352b and 3.1% to US$363b in 2015 and 2016, respectively, for all product categories and regions. Automotive and communications segments are likely the main growth driver going forward. IDC also forecasted for more moderate growth of 3.6% in 2015, as the DRAM (memory) market stabilizes. In the longer-term, IDC forecasts a CAGR of 3.1% from 2014 to 2019, reaching US$389b in 2019. The trend going forward is likely a decline in the PC market but tremendous growth in the smart devices (i.e. smartphones) market. And according to IDC, IT investment by the Western European healthcare sector is forecasted to grow 10.6% to US$14.6b by 2018. Separately, Gartner projects a 6% growth in IT spending in Southeast Asia region to reach US$52b in 2015 and US$62b by 2018.
Downgrade to HOLD on valuation grounds
On these data, we have reasons to believe the industry outlook remains positive over the next few years. As we think VMS has more room to grow in its TMO segment, our current assumptions forecast for 10.2% and 9.2% growth in FY15 and FY16 PATMI, respectively. Consequently, our FV remains unchanged at S$8.41. But given that the share price has increased steadily to S$8.53, we downgrade VMS to HOLD on valuation grounds.
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