SINGAPORE (Nov 6): Venture Corp on Friday announced its 3Q17 results, posting earnings more than double to $111.4 million from $47.4 million a year ago.
This was attributed to a strong growth in revenue, value creation through R&D capabilities, cost management, and operational excellence.
Revenue was up 50.5% to $1.06 billion compared to $705.7 million last year, due mainly to progress across several strategic and operational imperatives, including strong execution of customers’ programmes and deepening of collaborative strategic partnerships.
Following the group’s positive results, CIMB is maintaining its “add” call on Venture with an increased target price of $20.87.
CiIMB says the group has posted strong earnings momentum in the past three quarters, driven by its success with customers in the life science/medical/others fields.
In a Friday report, analyst Willian Tng says, “Growing demand for data connectivity could also provide growth opportunities for Venture as its networking & communications segment has market-leading customers in this field.”
Hence, Tng expects the group’s results in 2H17 to be stronger than 1H17 and the positive momentum to lift the group’s FY18’s earnings above the FY07
Barring higher returns on its capital, Venture will have the financial muscle to raise DPS to a higher level. With the sale of its stake in Fischer Tech, Tng believes that 60 cents DPS for FY17 is a possibility.
RHB too is reiterating its “buy” recommendation on Venture with a target price of $24.10.
The research house says the group has forged tight partnerships and earned the trust of its key partners and customers, enabling it to secure more projects, as well as be more involved in more parts and process of the products being made.
Venture has also focused on value creation, which would benefit its customers by lowering product cost – and at the same time, increasing its margins.
The group is shifting towards being an original equipment manufacturer (OEM) from being a lower-margin pure electronics manufacturing services (EMS) player.
Moreover, it is also focusing on projects with better margins, instead on just pure revenue growth.
In addition, it has also been improving its operational capabilities with R&D, as well as hiring more talented and effective personnel.
In a Monday report, analyst Jarick Seet says, “This strategy has resulted in net margin improving to 10.5% in 3Q17 (3Q16: 6.7%). As such, we expect net margins going forward to range around 7-10%.”
The analyst also believes that the proceeds from the sale of Fischer Tech coupled with strong forecast earnings growth will bring about higher dividends.
Going forward, the group’s management has yet to notice any signs of a slowdown.
‘With the bright outlook ahead, coupled with excess capacity to grow, we expect strong NPAT growth and margins would be likely to continue,” says Seet.
As at 12.30pm, shares in Venture are trading 13.21% or $2.52 higher at $21.85.
The stock is also trading at 2.45 times FY17 book with a dividend yield of 4.1%.
