Venture Corp’s (VMS) 3Q13 revenue fell 3.4% YoY to S$588.5m but PATMI rose 7.7% to S$35.1m. Results were within our expectations, with 9M13 revenue of S$1,706.7m (-4.9%) and PATMI of S$93.1m (-8.4%) constituting 74.2% and 69.1% of our FY13 forecasts, respectively. We are expecting further sequential improvement in its financial performance in 4Q13. While VMS’s Printing & Imaging division was its weakest performer on a YoY basis with revenue falling 28%, we believe the situation is stabilising. Meanwhile, management remains focused on growing its market share with existing customers and penetrating new businesses with exciting growth prospects in light of the current uncertain macroeconomic environment. We roll forward our valuations on VMS to 15x FY14F EPS, and derive a higher fair value estimate of S$8.50 (previously S$7.94). Coupled with an attractive prospective dividend yield of 6.4%, we reiterate our BUY rating on VMS.
3Q13 results within expectations
Venture Corp’s (VMS) 3Q13 revenue fell 3.4% YoY to S$588.5m but PATMI rose 7.7% to S$35.1m. This was due largely to a higher gross margin of 23.9% (+2.1 ppt) and lower forex adjustment loss, but partially offset by a gain on disposal of associate of S$1.6m in 3Q12. Sequentially, topline was flat but bottomline jumped 16.6%. This set of results was within our expectations, with 9M13 revenue of S$1,706.7m (-4.9%) and PATMI of S$93.1m (-8.4%) constituting 74.2% and 69.1% of our FY13 forecasts, respectively. We are expecting further sequential improvement in VMS’s financial performance in 4Q13.
Strategies to deal with macro uncertainties
On a segmental basis, VMS’s weakest performer came from its Printing and Imaging (P&I) division, which recorded a 28% YoY decline in revenue to S$78.2m. Nevertheless, we believe the situation is recovering as HP, one of its key customers in this segment, recently highlighted that it managed to grow its printing hardware unit sales for the first time since 2011, while topline is also stabilising. Besides HP, VMS has 18 other P&I customers (as at end 2012), and management updated us that it is also seeing signs of improvement in these customers. While the global economic recovery remains modest, management’s strategy would be to focus on i) increasing its market share with existing customers, ii) capturing new customers, iii) penetrating new business segments with growth potential and iv) enhancing R&D efforts to come up with innovative products.
Roll forward our valuations and maintain BUY
VMS’s share price has rebounded 9.1% since we upgraded the stock to a ‘Buy’ on 14 Aug 2013, outperforming the STI’s 2.1% decline during the same period. We trim our FY13 PATMI forecasts marginally by 2% but retain our FY14 projections. Rolling forward our valuations to 15x FY14F EPS, we derive a higher fair value estimate of S$8.50 (previously S$7.94). VMS is currently trading at 13.8x FY14F PER, which is approximately one standard deviation below its 3-year average forward PER of 15.5x. Coupled with an attractive prospective dividend yield of 6.4%, we reiterate our BUY rating on VMS.
Strategies to deal with macro uncertainties
On a segmental basis, VMS’s weakest performer came from its Printing and Imaging (P&I) division, which recorded a 28% YoY decline in revenue to S$78.2m. Nevertheless, we believe the situation is recovering as HP, one of its key customers in this segment, recently highlighted that it managed to grow its printing hardware unit sales for the first time since 2011, while topline is also stabilising. Besides HP, VMS has 18 other P&I customers (as at end 2012), and management updated us that it is also seeing signs of improvement in these customers. While the global economic recovery remains modest, management’s strategy would be to focus on i) increasing its market share with existing customers, ii) capturing new customers, iii) penetrating new business segments with growth potential and iv) enhancing R&D efforts to come up with innovative products.
Roll forward our valuations and maintain BUY
VMS’s share price has rebounded 9.1% since we upgraded the stock to a ‘Buy’ on 14 Aug 2013, outperforming the STI’s 2.1% decline during the same period. We trim our FY13 PATMI forecasts marginally by 2% but retain our FY14 projections. Rolling forward our valuations to 15x FY14F EPS, we derive a higher fair value estimate of S$8.50 (previously S$7.94). VMS is currently trading at 13.8x FY14F PER, which is approximately one standard deviation below its 3-year average forward PER of 15.5x. Coupled with an attractive prospective dividend yield of 6.4%, we reiterate our BUY rating on VMS.
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