Maybank Kim Eng Research, June 5
Q1 2014 results showed the best signs yet of a return to growth with y-o-y revenue growth at its best since FY2007 while Patmi registered its third consecutive quarter of y-o-y improvement. This reinforces our view that Venture is on track for a 12 per cent per annum EPS growth in FY2014 after four years of earnings decline.
Trading at 13.7 times FY2014 PE estimate, we think the stock is undervalued and the earnings recovery story remains under-appreciated. Reiterate "buy" with target price of S$8.64, based on 16 times FY2014 PE estimate.
Already, Venture has delivered five consecutive quarters of y-o-y revenue growth, accompanied by three quarters of y-o-y Patmi growth. We expect the momentum to strengthen beyond FY2014. We are also encouraged by the fact that its customers are seeing improved business visibility.
We see additional earnings kicker from new customers, particularly in the life sciences arena. Even at this early stage, the prognosis is good: Four of its 12 new customers acquired in 2012 accounted for an encouraging 7 to 8 per cent of Q1 2014 sales, and their momentum could take it to 12 per cent for FY2014. Venture is also gaining traction with existing customers which have enjoyed earnings upgrades YTD.
M&A among its customer base is a risk.
BUY
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