UOBKyahian on 6 Aug 2015
FY15F PE (x): 14.7
FY16F PE (x): 13.5
Venture reported net profit of S$36.1m in 2Q15, in line with our forecast of
S$35.3m. Acceleration in revenue growth. Revenue increased by 10% yoy (1Q15: 3%
yoy) due to increased shipment to customers and appreciation of the US Dollar against
the Singapore Dollar. The economic environment remains challenging. Venture was
able to do well by securing more programmes from existing customers and winning new
customers.
Maintain BUY. Our target price is S$9.00, based on 16.5x 2015F PE (Benchmark
Electronics: 12.8x, Plexus Corporation: 14.2x), justified by its average forward PE of
16.4x over the past 10 years.
Showing posts with label Venture. Show all posts
Showing posts with label Venture. Show all posts
Tuesday, 11 August 2015
Venture
OCBC on 6 Aug 2015
Venture Corporation Limited (VMS) reported a set of in-line 2Q15 results as revenue recorded a strong 10.0% YoY growth to S$661.0m, with growth across most of its segments. 2Q15 PATMI rose 7.5% YoY to S$36.1m but saw its net margin declined 0.1 ppt to 5.5% as tax expense jumped 65.9% to S$6.2m due to changes in sales mix towards products that do not enjoy as much tax incentives granted to VMS. For 1H15, VMS’ PATMI, which formed 44.5% of our FY15 forecasts, grew 6.7% YoY to S$68.6m on the back of a 6.5% increase in revenue to 1.27b. We expect VMS’ Test & Measurement, Medical & Life Science and Other (TMO) segment to be in the front-seat driving steady growth ahead, with possibly better gross (more value-adding work) and PBT margins (cost management, productivity gains and improving efficiency). While results were largely in-line, we further increase our effective tax rate assumption to be conservative. Rolling-forward to 15x blended FY15/16F PER, our FV increase from S$8.41 to S$8.62. Reiterate BUY, supported by a decent current dividend yield of 6.2%.
Higher tax expense continues to show in 2Q15
Venture Corporation Limited (VMS) reported a set of in-line 2Q15 results as revenue recorded a strong 10.0% YoY growth to S$661.0m, with growth across most of its segments as it saw higher shipment and strengthening USD against SGD. 2Q15 PATMI rose 7.5% YoY to S$36.1m but saw its net margin declined 0.1 ppt to 5.5% as tax expense jumped 65.9% to S$6.2m due to changes in sales mix towards products that do not enjoy as much tax incentives granted to VMS. As much effort are put into cost management and driving productivity improvement, VMS’ 2Q15 PBT margin rose 0.2 ppt YoY to 6.4%. For 1H15, VMS’ PATMI, which formed 44.5% of our FY15 forecasts, grew 6.7% YoY to S$68.6m on the back of a 6.5% increase in revenue to 1.27b. We expect 2H15 to show more consistent YoY growth across both quarters.
Expects life sciences segment to be key growth driver
1H15 saw steady YoY growth across all the business segments of VMS with the exception of Printing & Imaging (P&I) segment, which is within our expectations. We expect this trend to continue and as seen in 1H15, with VMS’ Test & Measurement, Medical & Life Science and Other (TMO) segment in the front-seat driving growth ahead. Particularly, we expect its life science segment, where many of the new customers acquired over the past few years falls in this segment, to see higher contributions as VMS engage more with them. Also, margins in this segment are likely to be higher with more value-adding services. While no large upswing expected, we believe VMS will be able to sustain steady revenue growth and possibly better gross (more value-adding work) and PBT margins (cost management, productivity gains and improving efficiency) going forward. Venture’s diversified customer base with most serving globally is another positive factor with the uncertain macro-environment outlook.
Reiterate BUY, supported by 6.2% current dividend yield
While results were largely in-line, we further increase our effective tax rate assumption to be conservative, which lowers our FY15/16F PATMI by 1.7% each. Rolling-forward to 15x blended FY15/16F PER, our FV increase from S$8.41 to S$8.62. Reiterate BUY, supported by a decent current dividend yield of 6.2%.
Venture Corporation Limited (VMS) reported a set of in-line 2Q15 results as revenue recorded a strong 10.0% YoY growth to S$661.0m, with growth across most of its segments as it saw higher shipment and strengthening USD against SGD. 2Q15 PATMI rose 7.5% YoY to S$36.1m but saw its net margin declined 0.1 ppt to 5.5% as tax expense jumped 65.9% to S$6.2m due to changes in sales mix towards products that do not enjoy as much tax incentives granted to VMS. As much effort are put into cost management and driving productivity improvement, VMS’ 2Q15 PBT margin rose 0.2 ppt YoY to 6.4%. For 1H15, VMS’ PATMI, which formed 44.5% of our FY15 forecasts, grew 6.7% YoY to S$68.6m on the back of a 6.5% increase in revenue to 1.27b. We expect 2H15 to show more consistent YoY growth across both quarters.
Expects life sciences segment to be key growth driver
1H15 saw steady YoY growth across all the business segments of VMS with the exception of Printing & Imaging (P&I) segment, which is within our expectations. We expect this trend to continue and as seen in 1H15, with VMS’ Test & Measurement, Medical & Life Science and Other (TMO) segment in the front-seat driving growth ahead. Particularly, we expect its life science segment, where many of the new customers acquired over the past few years falls in this segment, to see higher contributions as VMS engage more with them. Also, margins in this segment are likely to be higher with more value-adding services. While no large upswing expected, we believe VMS will be able to sustain steady revenue growth and possibly better gross (more value-adding work) and PBT margins (cost management, productivity gains and improving efficiency) going forward. Venture’s diversified customer base with most serving globally is another positive factor with the uncertain macro-environment outlook.
Reiterate BUY, supported by 6.2% current dividend yield
While results were largely in-line, we further increase our effective tax rate assumption to be conservative, which lowers our FY15/16F PATMI by 1.7% each. Rolling-forward to 15x blended FY15/16F PER, our FV increase from S$8.41 to S$8.62. Reiterate BUY, supported by a decent current dividend yield of 6.2%.
Monday, 13 July 2015
Venture Corporation
UOBKayhian on 10 Jul 2015
FY15F PE (x): 14.2
FY16F PE (x): 13.0
Anticipate gradual recovery. Management expects a gradual sequential pick-up in quarterly revenue after a lacklustre 1Q15. Customers have not made significant changes to their forecasts despite heightened uncertainties. We expect revenue to increase 4.5% qoq in 2Q15 and have modelled an 8.6% hoh increase in revenue in 2H15. Venture has built a diversified customer base, which continues to provide the company resilience and stability. Cautiously optimistic. Venture is aiming for mid- to high-single-digit growth in top- and bottom lines for 2015. Disruptions from M&As involving its customers have abated. The depreciation of the Malaysian ringgit and the Singapore dollar will help Venture maintain net margin within the target 6-8% band. Maintain BUY. Our target price is S$9.00, based on 16.5x 2015F PE (Benchmark Electronics: 12.8x, Plexus Corporation: 14.2x), justified by its average forward PE of 16.4x over the past 10 years.
FY15F PE (x): 14.2
FY16F PE (x): 13.0
Anticipate gradual recovery. Management expects a gradual sequential pick-up in quarterly revenue after a lacklustre 1Q15. Customers have not made significant changes to their forecasts despite heightened uncertainties. We expect revenue to increase 4.5% qoq in 2Q15 and have modelled an 8.6% hoh increase in revenue in 2H15. Venture has built a diversified customer base, which continues to provide the company resilience and stability. Cautiously optimistic. Venture is aiming for mid- to high-single-digit growth in top- and bottom lines for 2015. Disruptions from M&As involving its customers have abated. The depreciation of the Malaysian ringgit and the Singapore dollar will help Venture maintain net margin within the target 6-8% band. Maintain BUY. Our target price is S$9.00, based on 16.5x 2015F PE (Benchmark Electronics: 12.8x, Plexus Corporation: 14.2x), justified by its average forward PE of 16.4x over the past 10 years.
Thursday, 11 June 2015
Venture Corp
OCBC on 10 June 2015
According to the World Semiconductor Trade Statistics (WSTS), the semiconductor market is forecasted to maintain steady growth of 3.4% in 2015 to US$347b, 3.4% in 2016 to US$359b and 3.0% in 2017 to US$370b. As highlighted in our previous report, we maintain our view that Venture Corporation Ltd’s (VMS) next wave of growth is likely to come from its Test & Measurement, Medical & Life Science and Others, which makes up a significant ~32% of its total revenue. While we do not expect a significant jump in revenue, we think the growth from particularly the Medical and Life sciences (ML) segment will be steady and meaningful. With a customer base that is likely to comprise of large MNCs in its ML segment, we think VMS will benefit from the increased IT spending by healthcare providers and through deeper collaboration with its customers. We keep our forecasts unchanged as this trend is within our expectation. However, the recent correction presents buying opportunity with an attractive FY15F dividend yield of 6.5%. Hence, we upgrade to BUY on VMS, with the same FV of S$8.41.
Semiconductor industry forecasted to grow steadily
According to the World Semiconductor Trade Statistics (WSTS), the semiconductor market is forecasted to maintain steady growth of 3.4% in 2015 to US$347b, 3.4% in 2016 to US$359b and 3.0% in 2017 to US$370b. The growth in 2015 will be largely driven by smartphones and automotive with the Asia-Pacific (7.0%) and Americas (3.7%) regions in the front seats while Europe (-3.6%) and Japan (-9.5%) is forecasted to show decline given their weaker currencies against USD. Beyond that, all regions are expected to record positive growth rates in 2016 and 2017. In addition, technology market watcher, Gartner, released encouraging 1Q15 data on worldwide server revenue, which grew 17.9% YoY to US$13.4b on the back of a 13.0% growth in shipments to 2.7m units.
Medical/Life sciences segment to drive growth
As highlighted in our previous report, we maintain our view that Venture Corporation Ltd’s (VMS) next wave of growth is likely to come from its Test & Measurement, Medical & Life Science and Others, which makes up a significant ~32% of its total FY14 revenue. While we do not expect a significant jump in revenue ahead, we think the growth from particularly its Medical and Life science (ML) segment will be steady and meaningful. From our checks, one of VMS’ key ML customers is U.S. based Illumina, which VMS worked with to launch a relatively low-cost desktop DNA sequencer in 2014. Notably, Illumina posted a strong set of 1Q15 results, and stated in their press release guiding for ~20% total revenue growth for FY15, which we expect VMS to benefit from it. Furthermore, according to Gartner, healthcare providers’ spending on IT products and services are expected to grow 7.0% to US$1.2b in India and 0.8% to US$2.9b in Middle-East and North Africa. With a customer base more than just Illumina for its ML segment, we think VMS will benefit from these increased spending and through deeper collaboration with its customers.
Upgrade to BUY on recent correction
We keep our forecasts unchanged as this trend is within our expectation. However, the recent correction presents buying opportunity with an attractive FY15F dividend yield of 6.5%. Hence, we upgrade toBUY on VMS, with the same FV of S$8.41.
According to the World Semiconductor Trade Statistics (WSTS), the semiconductor market is forecasted to maintain steady growth of 3.4% in 2015 to US$347b, 3.4% in 2016 to US$359b and 3.0% in 2017 to US$370b. The growth in 2015 will be largely driven by smartphones and automotive with the Asia-Pacific (7.0%) and Americas (3.7%) regions in the front seats while Europe (-3.6%) and Japan (-9.5%) is forecasted to show decline given their weaker currencies against USD. Beyond that, all regions are expected to record positive growth rates in 2016 and 2017. In addition, technology market watcher, Gartner, released encouraging 1Q15 data on worldwide server revenue, which grew 17.9% YoY to US$13.4b on the back of a 13.0% growth in shipments to 2.7m units.
Medical/Life sciences segment to drive growth
As highlighted in our previous report, we maintain our view that Venture Corporation Ltd’s (VMS) next wave of growth is likely to come from its Test & Measurement, Medical & Life Science and Others, which makes up a significant ~32% of its total FY14 revenue. While we do not expect a significant jump in revenue ahead, we think the growth from particularly its Medical and Life science (ML) segment will be steady and meaningful. From our checks, one of VMS’ key ML customers is U.S. based Illumina, which VMS worked with to launch a relatively low-cost desktop DNA sequencer in 2014. Notably, Illumina posted a strong set of 1Q15 results, and stated in their press release guiding for ~20% total revenue growth for FY15, which we expect VMS to benefit from it. Furthermore, according to Gartner, healthcare providers’ spending on IT products and services are expected to grow 7.0% to US$1.2b in India and 0.8% to US$2.9b in Middle-East and North Africa. With a customer base more than just Illumina for its ML segment, we think VMS will benefit from these increased spending and through deeper collaboration with its customers.
Upgrade to BUY on recent correction
We keep our forecasts unchanged as this trend is within our expectation. However, the recent correction presents buying opportunity with an attractive FY15F dividend yield of 6.5%. Hence, we upgrade toBUY on VMS, with the same FV of S$8.41.
Tuesday, 5 May 2015
Venture Corporation
UOBKayhian on 4 May 2015
FY15F PE (x): 15.5
FY16F PE (x): 14.2
Venture reported net profit of S$32.6m for 1Q15, below our expectations of S$36.2m. Muted revenue growth. Test & Measurement/Medical, Venture’s largest segment, grew 7.4% yoy due to strong demand for life science products, such as genome sequencers. Revenue from the Network & Communications segment grew 16.5% yoy due to product transfers from Oclaro. There was weakness from retail store solutions as some of its customers were affected by M&As. Maintain BUY. Our new target price is S$9.00, based on 2015F PE of 16.5x (Benchmark Electronics: 14.9x, Plexus Corporation: 14.5x), justified by its average forward PE of 16.4x over the past 10 years.
FY15F PE (x): 15.5
FY16F PE (x): 14.2
Venture reported net profit of S$32.6m for 1Q15, below our expectations of S$36.2m. Muted revenue growth. Test & Measurement/Medical, Venture’s largest segment, grew 7.4% yoy due to strong demand for life science products, such as genome sequencers. Revenue from the Network & Communications segment grew 16.5% yoy due to product transfers from Oclaro. There was weakness from retail store solutions as some of its customers were affected by M&As. Maintain BUY. Our new target price is S$9.00, based on 2015F PE of 16.5x (Benchmark Electronics: 14.9x, Plexus Corporation: 14.5x), justified by its average forward PE of 16.4x over the past 10 years.
Venture Corporation
OCBC on 4 May 2015
As the first quarter is always weak for Venture Corporation Limited (VMS), its 1Q15 revenue were within our expectations as it grew 3.0% YoY to S$608.7m, and formed 23.1% of our FY15F forecast. However, its PATMI came in slightly below our expectation as it reported a 5.8% YoY growth to S$32.6m, which formed 21.1% of our FY15F forecast. The lower PATMI was the result of the unexpected higher tax expense. Going forward, management guided that there are more opportunities to grow through the Test & Measurement and Medical & Life Science segment. We think the expected recovery in U.S. will help sustain VMS’ steady top-line growth with improving margins since cost management and productivity gains have always been management focus to drive efficiency. As we factor in 1Q15 results and VMS’ outlook, our FV remains unchanged at S$8.41 (still based on 15x FY15F P/E). Hence, we maintain HOLD on VMS, supported by a decent FY15F dividend yield of 5.9%.
Higher tax expense erodes 1Q15 earnings
As the first quarter is always weak for Venture Corporation Limited (VMS), its 1Q15 revenue were within our expectations as it grew 3.0% YoY to S$608.7m, and formed 23.1% of our FY15F forecast. However, its PATMI came in slightly below our expectation as it reported a 5.8% YoY growth to S$32.6m, which formed 21.1% of our FY15F forecast. The lower PATMI was the result of the unexpected higher tax expense, which jumped 91.8% YoY to S$5.7m, indicating an effective tax rate of 14.9% against our assumption of 10.0%. The higher tax expense was mainly due to changes in sales mix to more products that do not enjoy tax incentives granted to VMS. Despite the higher tax expense, 1Q15 net margin increased 0.14 ppt YoY to 5.4% while PBT margin still grew 0.59 ppt to 6.3% on disciplined cost management and improved productivity. We believe the improved PBT margin was also driven by growth in its higher-margin segments such as medical and life science.
Growth to sustain and gross margin to improve
Going forward, management guided that there are more opportunities to grow through the Test & Measurement and Medical & Life Science segment as many of the new customers acquired over the past few years are in this segment. We expect contributions from these customers to grow as projects are still relatively new. We also believe the margins in this segment are likely to be higher than other segments as VMS performs more value-adding services to the customers. Furthermore, market watcher Gartner still expect worldwide semiconductor sales to grow 4.0% in 2015 to reach US$354b. With ~80% or more of its customers based in U.S., we think the expected recovery in U.S. will help sustain VMS’ steady top-line growth with improving gross and PBT margins since cost management and productivity gains have always been management focus to drive efficiency.
Maintain HOLD
As we adjust on our model for higher margins segment to drive growth, the positive impact is offset by our higher effective tax rate assumption. Consequently, our FV remains unchanged at S$8.41 (still based on 15x FY15F P/E). Hence, we maintain HOLD on VMS, supported by a decent FY15F dividend yield of 5.9%.
As the first quarter is always weak for Venture Corporation Limited (VMS), its 1Q15 revenue were within our expectations as it grew 3.0% YoY to S$608.7m, and formed 23.1% of our FY15F forecast. However, its PATMI came in slightly below our expectation as it reported a 5.8% YoY growth to S$32.6m, which formed 21.1% of our FY15F forecast. The lower PATMI was the result of the unexpected higher tax expense, which jumped 91.8% YoY to S$5.7m, indicating an effective tax rate of 14.9% against our assumption of 10.0%. The higher tax expense was mainly due to changes in sales mix to more products that do not enjoy tax incentives granted to VMS. Despite the higher tax expense, 1Q15 net margin increased 0.14 ppt YoY to 5.4% while PBT margin still grew 0.59 ppt to 6.3% on disciplined cost management and improved productivity. We believe the improved PBT margin was also driven by growth in its higher-margin segments such as medical and life science.
Growth to sustain and gross margin to improve
Going forward, management guided that there are more opportunities to grow through the Test & Measurement and Medical & Life Science segment as many of the new customers acquired over the past few years are in this segment. We expect contributions from these customers to grow as projects are still relatively new. We also believe the margins in this segment are likely to be higher than other segments as VMS performs more value-adding services to the customers. Furthermore, market watcher Gartner still expect worldwide semiconductor sales to grow 4.0% in 2015 to reach US$354b. With ~80% or more of its customers based in U.S., we think the expected recovery in U.S. will help sustain VMS’ steady top-line growth with improving gross and PBT margins since cost management and productivity gains have always been management focus to drive efficiency.
Maintain HOLD
As we adjust on our model for higher margins segment to drive growth, the positive impact is offset by our higher effective tax rate assumption. Consequently, our FV remains unchanged at S$8.41 (still based on 15x FY15F P/E). Hence, we maintain HOLD on VMS, supported by a decent FY15F dividend yield of 5.9%.
Friday, 17 April 2015
Venture Corp
OCBC on 26 Mar 2015
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.
Monday, 2 March 2015
Venture Corp
OCBC on 2 Mar 2015
We continue to see steady growth for Venture Corp (VMS) as its FY14 revenue rose 5.8% to S$2465.5m while PATMI improved 6.6% to S$139.8m. All product segments except for PC & Data Storage achieved top-line growth, with Test & Measurement/Medical & Life Science/Others (TMO) being the main growth driver. FY14 results came in within our expectations as revenue and PATMI formed 102.0% and 100.1% of our forecasts. We believe VMS will continue its growth momentum even as management cautioned against the slowing Europe economy on various reasons including diversified customer base as well as protecting and improving margins by engaging in value-adding services such as design and R&D works of new products for customers. As we update our assumptions and introduce FY16 forecasts, we bump up our FY15 revenue projection by 1.7% while keeping our PATMI forecast largely unchanged. Rolling-forward our valuation to 15x FY15F P/E, we raise our FV from S$8.04 to S$8.41. Maintain BUY, supported by an attractive FY15F dividend yield of 6.2%.
Growth momentum continued into FY14
We continue to see steady growth for Venture Corp (VMS) as it reported a 3.5% YoY growth in its 4Q14 PATMI to S$39.3m on the back of an 8.3% increase in revenue to S$674.7m. For FY14, revenue rose 5.8% to S$2465.5m while PATMI improved 6.6% to S$139.8m. All product segments except for PC & Data Storage achieved top-line growth, with Test & Measurement/Medical & Life Science/Others (TMO) being the main growth driver as it recorded 22.8% YoY jump in revenue in FY14. VMS’ FY14 PBT margin was 0.3ppt higher at 6.3% while net margin was 5.7% (FY13: 5.6%). Net margin was impacted by the higher tax expense due to changes in tax incentives. Going forward, we expect tax rate to normalize at 10% each year, at least in the next two years. FY14 results came in within our expectations as revenue and PATMI formed 102.0% and 100.1% of our forecasts.
Expects steady growth with sustainable margins
We believe VMS will continue its growth momentum even as management cautioned against the slowing Europe economy given the following factors: 1) VMS has a diversified customer base with more than 100 customers, which help reduces concentrated exposure to the European market; 2) strengthening of USD against SGD helps but note that effect is likely to be partially offset by higher costs in Asia (e.g. higher minimum wage) and weaker Euro against SGD; 3) we believe VMS is able to improve its margins by providing value-adding services such as more design and research works on new products for customers, and lastly; 4) broad-based revenue growth with TMO segment being the key driver going forward, and we also expect higher contributions from its life science customers to command higher margins as well.
Raise FV; maintain BUY
As we incorporate FY14 results, VMS’ outlook and introduce FY16 forecasts, we bump up our FY15 revenue projection by 1.7% while keeping our PATMI forecast largely unchanged as our previous assumption for PBT margin was slightly too optimistic. Rolling-forward our valuation to 15x FY15F P/E, we raise our FV from S$8.04 to S$8.41. Maintain BUY, supported by an attractive FY15F dividend yield of 6.2%.
We continue to see steady growth for Venture Corp (VMS) as it reported a 3.5% YoY growth in its 4Q14 PATMI to S$39.3m on the back of an 8.3% increase in revenue to S$674.7m. For FY14, revenue rose 5.8% to S$2465.5m while PATMI improved 6.6% to S$139.8m. All product segments except for PC & Data Storage achieved top-line growth, with Test & Measurement/Medical & Life Science/Others (TMO) being the main growth driver as it recorded 22.8% YoY jump in revenue in FY14. VMS’ FY14 PBT margin was 0.3ppt higher at 6.3% while net margin was 5.7% (FY13: 5.6%). Net margin was impacted by the higher tax expense due to changes in tax incentives. Going forward, we expect tax rate to normalize at 10% each year, at least in the next two years. FY14 results came in within our expectations as revenue and PATMI formed 102.0% and 100.1% of our forecasts.
Expects steady growth with sustainable margins
We believe VMS will continue its growth momentum even as management cautioned against the slowing Europe economy given the following factors: 1) VMS has a diversified customer base with more than 100 customers, which help reduces concentrated exposure to the European market; 2) strengthening of USD against SGD helps but note that effect is likely to be partially offset by higher costs in Asia (e.g. higher minimum wage) and weaker Euro against SGD; 3) we believe VMS is able to improve its margins by providing value-adding services such as more design and research works on new products for customers, and lastly; 4) broad-based revenue growth with TMO segment being the key driver going forward, and we also expect higher contributions from its life science customers to command higher margins as well.
Raise FV; maintain BUY
As we incorporate FY14 results, VMS’ outlook and introduce FY16 forecasts, we bump up our FY15 revenue projection by 1.7% while keeping our PATMI forecast largely unchanged as our previous assumption for PBT margin was slightly too optimistic. Rolling-forward our valuation to 15x FY15F P/E, we raise our FV from S$8.04 to S$8.41. Maintain BUY, supported by an attractive FY15F dividend yield of 6.2%.
Friday, 30 January 2015
Venture Corporation
UOBKayhian on 30 Jan 2015
FY14F PE (x): 16.3
FY15F PE (x): 13.9
Growing and differentiating. Venture targets to achieve mid- to high-single-digit growth in top-line and bottom line for 2015. The operating environment for Venture remains tough with corporations continuing staying lean on capital and IT expenditure. However, Venture is able to cope with the adversity by differentiating itself through a highly diversified product portfolio and customer base while expanding its engineering and R&D capabilities. Growing and differentiating. Venture is aiming for mid- to high-single-digit growth in topline and bottom line for 2015. Disruptions from M&As involving its customers have abated. The depreciation of the Malaysian ringgit and Singapore dollar will help Venture maintain net margin within the targeted 6-8%. Over the longer term, Venture can count on the Life Science segment for growth. Maintain BUY. Rolling forward valuation to 2015, our target price is S$8.75, based on 15x 2015F PE (Benchmark Electronics: 14.7x, Plexus Corporation: 12.8x), justified by its average forward PE of 16.4x over the past 10 years.
FY14F PE (x): 16.3
FY15F PE (x): 13.9
Growing and differentiating. Venture targets to achieve mid- to high-single-digit growth in top-line and bottom line for 2015. The operating environment for Venture remains tough with corporations continuing staying lean on capital and IT expenditure. However, Venture is able to cope with the adversity by differentiating itself through a highly diversified product portfolio and customer base while expanding its engineering and R&D capabilities. Growing and differentiating. Venture is aiming for mid- to high-single-digit growth in topline and bottom line for 2015. Disruptions from M&As involving its customers have abated. The depreciation of the Malaysian ringgit and Singapore dollar will help Venture maintain net margin within the targeted 6-8%. Over the longer term, Venture can count on the Life Science segment for growth. Maintain BUY. Rolling forward valuation to 2015, our target price is S$8.75, based on 15x 2015F PE (Benchmark Electronics: 14.7x, Plexus Corporation: 12.8x), justified by its average forward PE of 16.4x over the past 10 years.
Tuesday, 11 November 2014
Venture
UOBKayhian on 10 Nov 2014
FY14F PE (x): 15.1
FY15F PE (x): 13.2
Venture reported net profit of S$36.1m for 3Q14, in line with our expectation. Positive
shift in product mix. Venture did not experience the usual seasonal pick-up. Revenue
grew only 1.7% yoy, held back as the US$ depreciated against the S$. Revenue
contribution was stable for most segments, except for Computer Peripherals & Data
Storage, where revenue declined 15.8% qoq as Honeywell acquired Venture’s major
customer Intermec.
Upgrade to BUY. We lift our target price slightly to S$8.25, based on 16.5x 2014F PE
(Benchmark Electronics: 14.9x, Plexus Corporation: 14.5x), justified by its average
forward PE of 16.5x over the past 10 years.
FY14F PE (x): 15.1
FY15F PE (x): 13.2
Venture reported net profit of S$36.1m for 3Q14, in line with our expectation. Positive
shift in product mix. Venture did not experience the usual seasonal pick-up. Revenue
grew only 1.7% yoy, held back as the US$ depreciated against the S$. Revenue
contribution was stable for most segments, except for Computer Peripherals & Data
Storage, where revenue declined 15.8% qoq as Honeywell acquired Venture’s major
customer Intermec.
Upgrade to BUY. We lift our target price slightly to S$8.25, based on 16.5x 2014F PE
(Benchmark Electronics: 14.9x, Plexus Corporation: 14.5x), justified by its average
forward PE of 16.5x over the past 10 years.
Venture Corporation
Kim Eng on 10 Nov 2014
3Q14 net profit rose 3% YoY and 8% QoQ to SGD36.1m, its seventh consecutive quarterly improvement, with net margins of 6% at the top of its recent range. 9M14 YoY profit growth of 8% was not the double digits expected due to a higher tax rate. However, the recovery trend is intact, as 9M14 pretax profit growth of 14% YoY would have been reflected in net profit if not for the higher tax.
Bright spots to persist
Test & Measurement/Medical outperformed, with revenue up 26% YoY. This strength is expected to persist. Agilent’s split into two is expected to jumpstart a new growth phase. A Republican Congress could also generate tax savings for medical-device makers next year. With Microsoft no longer supporting Windows XP, Retail Store Solutions (+1.2% YoY) could receive a boost next year from retailers’ upgrades.
Outlook still positive
Management pointed out that sentiment among its customers is generally positive, with less-frequent customer consolidation concerns. Wage pressure could persist but it has productivity programmes to counter this. It also expects to roll out new programmes for existing and new customers to sustain growth.
Maintain BUY
We lower FY14E profit forecast by 3% but maintain BUY for a continued turnaround this year and projected growth of 15% next year. Dividend yields are also attractive at ~7%. TP is SGD8.88, at 15x FY15E EPS, in line with global peers.
- 3Q14 broadly in line. Seventh consecutive quarter of improvement. Net margins at top of recent 5-6% range.
- Customers generally upbeat, with less industry customer consolidation activities. Catalysts from continued recovery.
- Lower FY14E EPS by 3% for higher tax rate. Maintain BUY & SGD8.88 TP (15x FY15E EPS).
3Q14 net profit rose 3% YoY and 8% QoQ to SGD36.1m, its seventh consecutive quarterly improvement, with net margins of 6% at the top of its recent range. 9M14 YoY profit growth of 8% was not the double digits expected due to a higher tax rate. However, the recovery trend is intact, as 9M14 pretax profit growth of 14% YoY would have been reflected in net profit if not for the higher tax.
Bright spots to persist
Test & Measurement/Medical outperformed, with revenue up 26% YoY. This strength is expected to persist. Agilent’s split into two is expected to jumpstart a new growth phase. A Republican Congress could also generate tax savings for medical-device makers next year. With Microsoft no longer supporting Windows XP, Retail Store Solutions (+1.2% YoY) could receive a boost next year from retailers’ upgrades.
Outlook still positive
Management pointed out that sentiment among its customers is generally positive, with less-frequent customer consolidation concerns. Wage pressure could persist but it has productivity programmes to counter this. It also expects to roll out new programmes for existing and new customers to sustain growth.
Maintain BUY
We lower FY14E profit forecast by 3% but maintain BUY for a continued turnaround this year and projected growth of 15% next year. Dividend yields are also attractive at ~7%. TP is SGD8.88, at 15x FY15E EPS, in line with global peers.
Venture Corp
OCBC on 10 Nov 2014
Venture Corp (VMS) reported a decent set of 3Q14 results with a 1.7% YoY revenue growth to S$598.7m while PATMI improved 3.1% to S$36.1m. For 9M14, revenue and PATMI grew 4.9% and 7.9% YoY to S$1.8b and S$100.5m respectively, but they were slightly below our expectation as they formed 74.1% and 70.5% of our FY14 projections. Its 9M14 PBT margin grew 0.6 ppt to 6.3%, which we believe the growth to be largely attributable to growth in its Test & Measurement / Medical / Others segment. Management guided that current level of margins is sustainable at least for the next few quarters. While 4Q has historically been the peak quarter, taking into account VMS’ 3Q14 results and growth outlook, we reduce our FY14 and FY15 PATMI forecasts by 2.4% and 2.3%, respectively. Consequently, we lower our FV from S$8.24 to S$8.04. Maintain BUY, supported by an attractive FY14F dividend yield of 6.6%.
Revenue and PATMI registered YoY growth in 3Q14
Venture Corp (VMS) reported a decent set of 3Q14 results with a 1.7% YoY revenue growth to S$598.7m while PATMI improved 3.1% to S$36.1m. Revenue growth was mainly driven by its Test & Measurement / Medical / Others (TMMO) segment with a 25.9% YoY increase to S$192.3m but offset by its Computer Peripherals & Data Storage (CPDS) segment, which declined 35.1% to S$46.8m. For 9M14, revenue and PATMI grew 4.9% and 7.9% YoY to S$1.8b and S$100.5m respectively, but they were slightly below our expectation as they formed 74.1% and 70.5% of our FY14 projections. The lower than projected 9M14 PATMI was mainly due to higher income tax as some of VMS’ subsidiaries were no longer receiving tax incentives as they did in FY13. We think its CPDS segment will continue to face lower revenue for the next few quarters due to product rationalization process post consolidation/separation of VMS’ customers. One example would be the spinoff of Keysight from Agilent.
Sustainable margins as customer mix shifts positively
VMS’ 3Q14 profit before tax (PBT) margin improved 0.8 ppt YoY to 6.8% while net margin remain flat. For 9M14, despite a 130.2% YoY increase in income tax, its net margin increased by 0.1 ppt to 5.6%. More relevantly, its 9M14 PBT margin grew 0.6 ppt to 6.3%, which we believe to be largely attributable to growth in its TMMO segment. We think revenue will not see significant upswing but stable growth. On profitability side, management guided that current level of margins is sustainable at least for the next few quarters. This will be achieved through higher value services by continuing to engage in more design and developmental works on new products together with customers. We think this strategy is already paying off, as both PBT and net margins had been improving YoY from 1Q13 to 3Q14.
Lower FV; maintain BUY
While 4Q has historically been the peak quarter, taking into account VMS’ 3Q14 results and growth outlook, we reduce our FY14 and FY15 PATMI forecasts by 2.4% and 2.3%, respectively. Consequently, we lower our FV from S$8.24 to S$8.04. Maintain BUY, supported by an attractive FY14F dividend yield of 6.6%.
Venture Corp (VMS) reported a decent set of 3Q14 results with a 1.7% YoY revenue growth to S$598.7m while PATMI improved 3.1% to S$36.1m. Revenue growth was mainly driven by its Test & Measurement / Medical / Others (TMMO) segment with a 25.9% YoY increase to S$192.3m but offset by its Computer Peripherals & Data Storage (CPDS) segment, which declined 35.1% to S$46.8m. For 9M14, revenue and PATMI grew 4.9% and 7.9% YoY to S$1.8b and S$100.5m respectively, but they were slightly below our expectation as they formed 74.1% and 70.5% of our FY14 projections. The lower than projected 9M14 PATMI was mainly due to higher income tax as some of VMS’ subsidiaries were no longer receiving tax incentives as they did in FY13. We think its CPDS segment will continue to face lower revenue for the next few quarters due to product rationalization process post consolidation/separation of VMS’ customers. One example would be the spinoff of Keysight from Agilent.
Sustainable margins as customer mix shifts positively
VMS’ 3Q14 profit before tax (PBT) margin improved 0.8 ppt YoY to 6.8% while net margin remain flat. For 9M14, despite a 130.2% YoY increase in income tax, its net margin increased by 0.1 ppt to 5.6%. More relevantly, its 9M14 PBT margin grew 0.6 ppt to 6.3%, which we believe to be largely attributable to growth in its TMMO segment. We think revenue will not see significant upswing but stable growth. On profitability side, management guided that current level of margins is sustainable at least for the next few quarters. This will be achieved through higher value services by continuing to engage in more design and developmental works on new products together with customers. We think this strategy is already paying off, as both PBT and net margins had been improving YoY from 1Q13 to 3Q14.
Lower FV; maintain BUY
While 4Q has historically been the peak quarter, taking into account VMS’ 3Q14 results and growth outlook, we reduce our FY14 and FY15 PATMI forecasts by 2.4% and 2.3%, respectively. Consequently, we lower our FV from S$8.24 to S$8.04. Maintain BUY, supported by an attractive FY14F dividend yield of 6.6%.
Thursday, 9 October 2014
Venture Corporation
Kim Eng on 7 Oct 2014
Hewlett Packard (HP) will be splitting into two publicly traded companies: HP Enterprise, focusing on cloud computing, servers, networking, business software and other tools for business; and HP Inc for printers and PCs. In Singapore, Venture supplies HP with enterprise printers (eg high-speed laserjet colour and black & white printers) that are sold to large corporations and SMEs. It does not make any more consumer printers for HP.
Minimal to positive impact
Venture’s printing & imaging business has shrunk over the years to just 11% of its revenue, after its exit from the consumer-printer market years before. We think any adverse impact from this split will be minimal. HP accounts for only 5-6% of Venture’s revenue. Venture has other printer customers such as Intermec, which makes products with better growth potential. These include transaction printers for credit-card receipts and labels.
In fact, the split may be good for HP, and by extension, Venture, as it could potentially improve HP’s nimbleness. Printer cartridges generate a lot of cash. Historically, this cash was used by HP for acquisitions unrelated to its printer/PC business. The new standalone company should be able to keep this cash for acquisitions to benefit its printer/PC business directly, which still has room for growth in emerging markets. HP's printer/PC revenue actually grew by 2% in the last 12 months, in contrast to a 4% drop by its enterprise business. No change to our EPS or TP for Venture for now.
- Maintain BUY and SGD9.50 TP, based on 16x FY15E P/E based on peer average.
- HP splitting into two: Enterprise and Printers & PCs. Now minimal 5-6% of Venture’s revenue. Only orders business, not consumer, printers.
- Split could be a long-term positive. Allows HP’s printer/PC business to be more nimble, keep cash for own expansion.
Hewlett Packard (HP) will be splitting into two publicly traded companies: HP Enterprise, focusing on cloud computing, servers, networking, business software and other tools for business; and HP Inc for printers and PCs. In Singapore, Venture supplies HP with enterprise printers (eg high-speed laserjet colour and black & white printers) that are sold to large corporations and SMEs. It does not make any more consumer printers for HP.
Minimal to positive impact
Venture’s printing & imaging business has shrunk over the years to just 11% of its revenue, after its exit from the consumer-printer market years before. We think any adverse impact from this split will be minimal. HP accounts for only 5-6% of Venture’s revenue. Venture has other printer customers such as Intermec, which makes products with better growth potential. These include transaction printers for credit-card receipts and labels.
In fact, the split may be good for HP, and by extension, Venture, as it could potentially improve HP’s nimbleness. Printer cartridges generate a lot of cash. Historically, this cash was used by HP for acquisitions unrelated to its printer/PC business. The new standalone company should be able to keep this cash for acquisitions to benefit its printer/PC business directly, which still has room for growth in emerging markets. HP's printer/PC revenue actually grew by 2% in the last 12 months, in contrast to a 4% drop by its enterprise business. No change to our EPS or TP for Venture for now.
Friday, 12 September 2014
Venture Corp
OCCB on 11 Sep 2014
IDC reported that enterprise wireless local area network (WLAN) market grew 7.7% YoY in 2Q14 while worldwide Ethernet switch (ES) market increased 6.2%, led by 21% growth in Asia Pacific ex Japan and 13.9% growth in Western Europe. We believe the growth in cloud deployments and worldwide network demand from datacentres will continue to drive investments in these two markets into FY15. Although Eurozone’s Manufacturing PMI of 50.7 (Jul-14: 51.8) is at its 13-month low in Aug-14, U.S. manufacturing PMI increased 1.9 ppt in Jul-14 to 59.0% while Markit’s Aug-14 Asia Sector PMI showed increased business activity. We think the positive signs showing in U.S. and Asia are likely to sustain for 2H14. Hence, we expect VMS to benefit alongside with its customers who are based in U.S. and Asia and we continue to retain our forecast. Given the recent decline in share price, we upgrade VMS to BUY on valuation grounds, with an unchanged fair value of S$8.24 (15x blended FY14/15F EPS), supported by an attractive FY14F dividend yield of 6.3%.
Expects growth in Networking & Communications segment
Semiconductor Industry Association (SIA) reported last week that sales in Jul-14 grew 14.9%, 11.2% and 8.1% YoY in Europe, Asia Pacific and Americas, respectively. According to IDC, enterprise wireless local area network (WLAN) market grew 7.7% YoY in 2Q14 while worldwide Ethernet switch (ES) market increased 6.2%, led by growth of 21% in Asia Pacific ex Japan and 13.9% in Western Europe. Correspondingly, Venture Corp (VMS) reported 6.5% YoY growth in its 2Q14 Networking & Communications (N&C) segment revenue to S$100.2m. We believe the growth in cloud deployments and worldwide network demand from datacentres will continue to drive investments in these two markets into FY15. With VMS’ N&C segment making up ~16.7% and ~16.3% of its 2QFY14 and 1HFY14’s total revenue, respectively, we think VMS is poised to capture the growth expected in this segment.
Generally positive outlook likely to sustain
Markit reported Eurozone’s Manufacturing PMI of 50.7 (Jul-14: 51.8) is at its 13-month low in Aug-14, as companies faced slower increases in both total new orders and new export business. According to Institute for Supply Management (ISM), U.S. Aug-14 PMI increased 1.9 ppt in Jul-14 to 59.0%, which is the highest since recording 59.1% in Mar-11, indicating continued expansion in manufacturing. Markit’s Aug-14 Asia Sector PMI also showed increased business activity, led by technological equipment producers, who saw the strongest output expansion in seven months. Based on our estimates as at its 2QFY14 results, with ~50%, ~10% and ~40% of VMS’ customers to be based in U.S., Europe and Asia Pacific, respectively, we believe the positive data points in U.S. and Asia would offset Eurozone’s decline and benefit VMS. We expect the positive outlook to sustain for the remaining 2H14.
Upgrade to BUY based on valuations
Hence, we expect VMS to benefit alongside with its customers who are based in U.S. and Asia and we continue to retain our forecast. Given the recent decline in share price, we upgrade VMS to BUY on valuation grounds, with an unchanged fair value of S$8.24 (15x blended FY14/15F EPS), supported by an attractive FY14F dividend yield of 6.3%.
Semiconductor Industry Association (SIA) reported last week that sales in Jul-14 grew 14.9%, 11.2% and 8.1% YoY in Europe, Asia Pacific and Americas, respectively. According to IDC, enterprise wireless local area network (WLAN) market grew 7.7% YoY in 2Q14 while worldwide Ethernet switch (ES) market increased 6.2%, led by growth of 21% in Asia Pacific ex Japan and 13.9% in Western Europe. Correspondingly, Venture Corp (VMS) reported 6.5% YoY growth in its 2Q14 Networking & Communications (N&C) segment revenue to S$100.2m. We believe the growth in cloud deployments and worldwide network demand from datacentres will continue to drive investments in these two markets into FY15. With VMS’ N&C segment making up ~16.7% and ~16.3% of its 2QFY14 and 1HFY14’s total revenue, respectively, we think VMS is poised to capture the growth expected in this segment.
Generally positive outlook likely to sustain
Markit reported Eurozone’s Manufacturing PMI of 50.7 (Jul-14: 51.8) is at its 13-month low in Aug-14, as companies faced slower increases in both total new orders and new export business. According to Institute for Supply Management (ISM), U.S. Aug-14 PMI increased 1.9 ppt in Jul-14 to 59.0%, which is the highest since recording 59.1% in Mar-11, indicating continued expansion in manufacturing. Markit’s Aug-14 Asia Sector PMI also showed increased business activity, led by technological equipment producers, who saw the strongest output expansion in seven months. Based on our estimates as at its 2QFY14 results, with ~50%, ~10% and ~40% of VMS’ customers to be based in U.S., Europe and Asia Pacific, respectively, we believe the positive data points in U.S. and Asia would offset Eurozone’s decline and benefit VMS. We expect the positive outlook to sustain for the remaining 2H14.
Upgrade to BUY based on valuations
Hence, we expect VMS to benefit alongside with its customers who are based in U.S. and Asia and we continue to retain our forecast. Given the recent decline in share price, we upgrade VMS to BUY on valuation grounds, with an unchanged fair value of S$8.24 (15x blended FY14/15F EPS), supported by an attractive FY14F dividend yield of 6.3%.
Tuesday, 12 August 2014
Venture Corp
Kim Eng on 11 Aug 2014
2Q14 net profit was slightly below due to USD weakness, higher other opex (R&D) and tax provisions. No cause for concern, as what we were interested in was better topline growth and margins. To this end, revenue grew 2% YoY to SGD601m. Net profit was up 12% YoY to SGD34m. Net margins improved to 5.6% from5.2% in 1Q14 and 5.1% in 2Q13. 1H14 net rose 11% YoY to SGD64m or 44% of our FY14E forecast.
All’s looking up again
Now assuming a higher 9.6% tax rate (7% previously), we shave our FY14E net profit to SGD145.9m from SGD147m. This still implies11% YoY growth, marking a turnaround from last year’s -6%. Our FY15E-16E earnings are intact. TP raised to SGD9.50 (from SGD8.60) as we roll over to 16x FY15E P/E. Life Sciences (LF) and Networking & Communication (NC) should power this year’s growth. New LF customers have launched products that are selling well. NC growth should be led by Oclaro’s shift from China to Malaysia. Management is hopeful that M&Asamong its customers will not jeopardise Venture’s positive momentum this time around. Orders from Intermec and Micros,among its top 20 customers, have so far not been affected. Venture is already engaging Honeywell, Intermec’s buyer. Lastly, its fledgling 3D printer business is gaining traction and may be a bigger growth driver next year. Venture is working on “several” models, up from just one not too long ago.
- 2Q14 slightly below due to higher tax and R&D costs. No concern, as better topline and margins were what we were looking for.
- Growth drivers intact. 3D printers shaping up nicely. Could be more significant next year.
- Maintain BUY. TP raised to SGD9.50 from SGD8.60, after rollover to 16x FY15E P/E based on peer average.
2Q14 net profit was slightly below due to USD weakness, higher other opex (R&D) and tax provisions. No cause for concern, as what we were interested in was better topline growth and margins. To this end, revenue grew 2% YoY to SGD601m. Net profit was up 12% YoY to SGD34m. Net margins improved to 5.6% from5.2% in 1Q14 and 5.1% in 2Q13. 1H14 net rose 11% YoY to SGD64m or 44% of our FY14E forecast.
All’s looking up again
Now assuming a higher 9.6% tax rate (7% previously), we shave our FY14E net profit to SGD145.9m from SGD147m. This still implies11% YoY growth, marking a turnaround from last year’s -6%. Our FY15E-16E earnings are intact. TP raised to SGD9.50 (from SGD8.60) as we roll over to 16x FY15E P/E. Life Sciences (LF) and Networking & Communication (NC) should power this year’s growth. New LF customers have launched products that are selling well. NC growth should be led by Oclaro’s shift from China to Malaysia. Management is hopeful that M&Asamong its customers will not jeopardise Venture’s positive momentum this time around. Orders from Intermec and Micros,among its top 20 customers, have so far not been affected. Venture is already engaging Honeywell, Intermec’s buyer. Lastly, its fledgling 3D printer business is gaining traction and may be a bigger growth driver next year. Venture is working on “several” models, up from just one not too long ago.
Venture Corp
OCBC on 11 Aug 2014
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).
Thursday, 3 July 2014
Venture Corporation
Kim Eng on 3 Jul 2014
Unlike in the past, the latest two customer M&As – involving two medical customers and a top 20 customer MICROS – could bring in some good. Also, a previously-announced M&A involving another top 20 customer, Intermec, may be more positive than expected for Venture. We raise our FY15E earnings forecast by 1% to account for Intermec. Maintain BUY with TP of SGD8.64 (16x FY14E P/E).
It’s different this time
Unlike M&As in the past which led to lower volumes for Venture, the current batch of M&As involves:
So far, customer volumes have tracked forecasts, setting Venture up well to deliver 12% EPS growth in FY14E. For 2Q14E, we expect revenue to rise 6% YoY/5% QoQ to SGD622m and net profits to rise 27% YoY/24% QoQ to SGD38m. 6MFY14E profits should account for 47% of our full-year forecast. Results will be announced on 8 Aug.
- Customer-related M&As are favouring Venture for a change. Maintain BUY, with SGD8.64 TP, based on 16x FY14E P/E.
- The latest two M&As will add heft to two smaller customers and see the entry of a strong backer for a top 20 customer.
- Lastly, Honeywell’s acquisition of Intermec may have positive rather than negative implications for Venture after all.
Unlike in the past, the latest two customer M&As – involving two medical customers and a top 20 customer MICROS – could bring in some good. Also, a previously-announced M&A involving another top 20 customer, Intermec, may be more positive than expected for Venture. We raise our FY15E earnings forecast by 1% to account for Intermec. Maintain BUY with TP of SGD8.64 (16x FY14E P/E).
It’s different this time
Unlike M&As in the past which led to lower volumes for Venture, the current batch of M&As involves:
- A merger that will add heft to two small medical customers. The merger of two customers will create a much larger single customer, the biggest medical device company in the world,
- MICROS gets a strong backer in Oracle. Oracle’s entry will strengthen MICROS’s position without threatening its hardware POS business, for which Venture is a supplier, and
- More honey for Intermec. Honeywell, which is not involved in the mobile printing category that Venture engages in with Intermec, wants to grow Intermec’s overall business.
So far, customer volumes have tracked forecasts, setting Venture up well to deliver 12% EPS growth in FY14E. For 2Q14E, we expect revenue to rise 6% YoY/5% QoQ to SGD622m and net profits to rise 27% YoY/24% QoQ to SGD38m. 6MFY14E profits should account for 47% of our full-year forecast. Results will be announced on 8 Aug.
Friday, 13 June 2014
Venture Corporation
UOBKayhian on 13 June 2014
FY14F PE (x): 14.4
FY15F PE (x): 12.7
More stability, less volatility. In the past, customers gave overly optimistic forecasts and
cut orders on any minute sign of slowdown. Business sentiment for most customers
has turned positive this year. Demand from customers is “steadier” and execution for
new projects is on track. Most customers are providing a steady flow of orders.
Anticipates sequential lift in 2H14. We are gratified by the improvement in business
sentiment and the sequential growth in 1H14. The strengthening of the US economic
growth augurs well for Venture due to its base of predominantly US-based customers.
The stock continues to provide lucrative dividend yield of 6.6%.
Maintain BUY. Our target price is S$8.68, based on 16.4x 2014F PE (Benchmark
Electronics: 15.7x, Plexus Corporation: 15.6x), justified by its average forward PE of
16.5x over the past 10 years.
FY14F PE (x): 14.4
FY15F PE (x): 12.7
More stability, less volatility. In the past, customers gave overly optimistic forecasts and
cut orders on any minute sign of slowdown. Business sentiment for most customers
has turned positive this year. Demand from customers is “steadier” and execution for
new projects is on track. Most customers are providing a steady flow of orders.
Anticipates sequential lift in 2H14. We are gratified by the improvement in business
sentiment and the sequential growth in 1H14. The strengthening of the US economic
growth augurs well for Venture due to its base of predominantly US-based customers.
The stock continues to provide lucrative dividend yield of 6.6%.
Maintain BUY. Our target price is S$8.68, based on 16.4x 2014F PE (Benchmark
Electronics: 15.7x, Plexus Corporation: 15.6x), justified by its average forward PE of
16.5x over the past 10 years.
Venture
OCBC on 12 June 2014
We believe Venture Corp (VMS) will be able to benefit from the trend of accommodative policies being implemented by major central banks and governments to support economic growth. VMS highlighted that the business sentiment of most customers has generally been positive. Recent commentaries by some of its key customers on their outlook have largely affirmed this. However, there are still pockets of weaknesses, and VMS’s management had previously cautioned that it is too early to project a broad-based sustainable recovery. With bond yields remaining at low levels, we view VMS’s 6.7% FY14F dividend yield as an attractive investment proposition. Coupled with a forecasted cyclical earnings recovery, we deem it appropriate to upgrade VMS from Hold to BUY. Our fair value estimate is raised from S$7.78 to S$8.24 as we roll forward our valuations to 15x blended FY14/15F EPS.
Accommodative policies will bolster Venture’s recovery
We believe Venture Corp (VMS) will be able to benefit from the trend of accommodative policies being implemented by major central banks and governments to support economic growth. In the U.S., Federal Reserve Chairperson Janet Yellen has adopted a relatively dovish stance on interest rate hikes, while the ECB recently introduced a slew of measures such as cutting its deposit rate to -0.1% in a bid to fend off deflation. Closer to home, China has launched a mini stimulus package and lowered its reserve requirement ratio (effective 16 Jun) by 50 basis points to lend support to its 7.5% economic growth target. These measures have been undertaken because although recent macroeconomic data released have largely pointed to a recovery, it appears to be modest and still fraught with uncertainties and downside risks.
Outlook from major customers largely positive
VMS highlighted that the business sentiment of most customers has generally been positive. It expects improving contribution from customers secured in recent years and also the ramp-up of new programmes from a number of existing customers. Recent commentaries by some of VMS’s key customers on their outlook have largely affirmed this. However, there are still pockets of weaknesses, especially in emerging markets which are facing challenging conditions. VMS’s management had previously cautioned that it is too early to project a broad-based sustainable recovery. We believe the momentum of its growth is still highly dependent on end-market demand.
Upgrade to BUY
With the 10-year U.S. Treasury bond yield and 10-year Singapore government bond yield still remaining at low levels and economists also lowering their year-end target on where the former should be heading, we view VMS’s 6.7% FY14F dividend yield as an attractive investment proposition. Coupled with a forecasted cyclical earnings recovery growth of 8.7% in FY14 and 11.6% in FY15, which would mark its first positive PATMI growth since FY10, we deem it appropriate to upgrade VMS from Hold to BUY, with a higher fair value estimate of S$8.24 (previously S$7.78) as we roll forward our valuations to 15x blended FY14/15F EPS.
We believe Venture Corp (VMS) will be able to benefit from the trend of accommodative policies being implemented by major central banks and governments to support economic growth. In the U.S., Federal Reserve Chairperson Janet Yellen has adopted a relatively dovish stance on interest rate hikes, while the ECB recently introduced a slew of measures such as cutting its deposit rate to -0.1% in a bid to fend off deflation. Closer to home, China has launched a mini stimulus package and lowered its reserve requirement ratio (effective 16 Jun) by 50 basis points to lend support to its 7.5% economic growth target. These measures have been undertaken because although recent macroeconomic data released have largely pointed to a recovery, it appears to be modest and still fraught with uncertainties and downside risks.
Outlook from major customers largely positive
VMS highlighted that the business sentiment of most customers has generally been positive. It expects improving contribution from customers secured in recent years and also the ramp-up of new programmes from a number of existing customers. Recent commentaries by some of VMS’s key customers on their outlook have largely affirmed this. However, there are still pockets of weaknesses, especially in emerging markets which are facing challenging conditions. VMS’s management had previously cautioned that it is too early to project a broad-based sustainable recovery. We believe the momentum of its growth is still highly dependent on end-market demand.
Upgrade to BUY
With the 10-year U.S. Treasury bond yield and 10-year Singapore government bond yield still remaining at low levels and economists also lowering their year-end target on where the former should be heading, we view VMS’s 6.7% FY14F dividend yield as an attractive investment proposition. Coupled with a forecasted cyclical earnings recovery growth of 8.7% in FY14 and 11.6% in FY15, which would mark its first positive PATMI growth since FY10, we deem it appropriate to upgrade VMS from Hold to BUY, with a higher fair value estimate of S$8.24 (previously S$7.78) as we roll forward our valuations to 15x blended FY14/15F EPS.
Technology Sector
OCBC on 12 June 2014
Continued macroeconomic uncertainties have manifested in the recent results of the cyclical tech sector. For companies under our coverage, Venture Corp’s (VMS) 1Q14 earnings fell slightly short of our expectations while ECS Holdings’ PATMI was below. Other companies which reported lacklustre results include Amtek Engineering and Hi-P International. Nevertheless, we note that the weakness was not broad-based, as there were still companies which reported notably strong results, such as Silverlake Axis and UMS Holdings. Although expectations for a global macroeconomic recovery appear to be panning out, we believe downside risks are evident given that data points remain largely mixed. Hence, we maintain NEUTRAL on the tech sector. But we upgrade VMS from Hold to BUY, with a higher fair value estimate of S$8.24 (previously S$7.78) as we roll forward our valuations to 15x blended FY14/15F EPS. VMS remains as our preferred sector pick
Recent results reflect continued uncertainties
Continued macroeconomic uncertainties have manifested in the recent results of the cyclical tech sector. For companies under our coverage, Venture Corp’s (VMS) 1Q14 earnings fell slightly short of our expectations despite a 9.8% YoY growth, while ECS Holdings’ PATMI was below (-13.0% YoY) given weaker-than-expected revenue and a S$2m allowance made for inventory obsolescence. Other companies which reported lacklustre results include Amtek Engineering and Hi-P International. Nevertheless, we note that the weakness was not broad-based, as there were still companies which reported notably strong results. One example is Silverlake Axis, which delivered a stellar YoY PATMI growth of 32.7% to MYR62.9m in 3QFY14 which exceeded the street’s expectations. This was driven by solid sale of software and hardware products and good cost control. UMS Holdings also performed well, riding on the recovery in the semiconductor capital equipment market. Its 1Q14 revenue and PATMI grew by 23.2% and 62.8% YoY to S$34.3m and S$8.6m, respectively.
Macro data points remain mixed
Although expectations for a global macroeconomic recovery appear to be panning out, we believe downside risks are evident given that data points remain largely mixed. China’s official PMI of 50.8 for May was a five-month high, partly driven by the government’s mini-stimulus package. Its May exports also rebounded 7.0% YoY, beating the Bloomberg median estimate for an increase of 6.7%. However, May imports fell 1.6% YoY and the street’s 2014 GDP growth projection of 7.3% falls short of the government’s official 7.5% target. For the Euro zone, deflation risks are apparent and efforts to boost economic growth have resulted in accommodative policy measures being implemented by the ECB last week, such as the cutting of its deposit rate to below zero. Tech companies with significant exposure to Europe (more than 10% revenue contribution) include Valuetronics, Amtek, STATS ChipPAC and Hi-P. The U.S. ISM Manufacturing PMI SA reading of 55.4 was the highest reading YTD, setting the stage for a rebound in economic growth for the rest of the year. Nevertheless, the World Bank just pared its global economic growth forecast due to weakness in developing countries and a slow start by the U.S.
Upgrade VMS to BUY; maintain NEUTRAL on sector
In light of the on-going uncertainties, we maintain NEUTRAL on the tech sector. But we upgrade VMS from Hold to BUY, with a higher fair value estimate of S$8.24 (previously S$7.78) as we roll forward our valuations to 15x blended FY14/15F EPS. We believe the group is poised to benefit from a ramp up in contribution from new and existing customers in 2H14, and forecast its FY14 and FY15 EPS to improve by 8.7% and 11.6%, respectively. VMS remains as our preferred sector pick.
Continued macroeconomic uncertainties have manifested in the recent results of the cyclical tech sector. For companies under our coverage, Venture Corp’s (VMS) 1Q14 earnings fell slightly short of our expectations despite a 9.8% YoY growth, while ECS Holdings’ PATMI was below (-13.0% YoY) given weaker-than-expected revenue and a S$2m allowance made for inventory obsolescence. Other companies which reported lacklustre results include Amtek Engineering and Hi-P International. Nevertheless, we note that the weakness was not broad-based, as there were still companies which reported notably strong results. One example is Silverlake Axis, which delivered a stellar YoY PATMI growth of 32.7% to MYR62.9m in 3QFY14 which exceeded the street’s expectations. This was driven by solid sale of software and hardware products and good cost control. UMS Holdings also performed well, riding on the recovery in the semiconductor capital equipment market. Its 1Q14 revenue and PATMI grew by 23.2% and 62.8% YoY to S$34.3m and S$8.6m, respectively.
Macro data points remain mixed
Although expectations for a global macroeconomic recovery appear to be panning out, we believe downside risks are evident given that data points remain largely mixed. China’s official PMI of 50.8 for May was a five-month high, partly driven by the government’s mini-stimulus package. Its May exports also rebounded 7.0% YoY, beating the Bloomberg median estimate for an increase of 6.7%. However, May imports fell 1.6% YoY and the street’s 2014 GDP growth projection of 7.3% falls short of the government’s official 7.5% target. For the Euro zone, deflation risks are apparent and efforts to boost economic growth have resulted in accommodative policy measures being implemented by the ECB last week, such as the cutting of its deposit rate to below zero. Tech companies with significant exposure to Europe (more than 10% revenue contribution) include Valuetronics, Amtek, STATS ChipPAC and Hi-P. The U.S. ISM Manufacturing PMI SA reading of 55.4 was the highest reading YTD, setting the stage for a rebound in economic growth for the rest of the year. Nevertheless, the World Bank just pared its global economic growth forecast due to weakness in developing countries and a slow start by the U.S.
Upgrade VMS to BUY; maintain NEUTRAL on sector
In light of the on-going uncertainties, we maintain NEUTRAL on the tech sector. But we upgrade VMS from Hold to BUY, with a higher fair value estimate of S$8.24 (previously S$7.78) as we roll forward our valuations to 15x blended FY14/15F EPS. We believe the group is poised to benefit from a ramp up in contribution from new and existing customers in 2H14, and forecast its FY14 and FY15 EPS to improve by 8.7% and 11.6%, respectively. VMS remains as our preferred sector pick.
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