The slight increase in revenue of 2% y-o-y during the quarter, which was held back by the ongoing component shortage in the electronics manufacturing industry, largely missed analysts’ expectations, except for UOB Kay Hian, which deemed it in line with its FY2021 estimates.
Based on the group’s 1Q update, CGS-CIMB analyst William Tng has reduced his target price on Venture to $22.51 from $24.84 previously, as he cuts his revenue forecasts for FY2021 to FY2023 by 3% to 5%.
Tng has also reduced his earnings estimates for the same period by 7% to 10%.
The cuts in both revenue and earnings estimates are due to the potential impact arising from the shortages in components, says Tng.
“To better appreciate the long-term valuation of Venture, we switch our target price-to-earnings (P/E) multiple to 17.1 times (0.5 standard deviation or s.d. above its 20-year average of 15.1 times). Previously, we ascribed a target P/E multiple of 18.5 times (0.5 s.d. above its 14-year average of 15 times). Rolling over to FY2022, our target prices is cut to $22.51,” he writes.
DBS analyst Ling Lee Keng has also reduced her target price on Venture Corp to $22.70 from $24.30 on the back of its lower-than-expected earnings.
The new target price is pegged to 20.5 times P/E on FY2021 earnings, 2 s.d. of its five-year average P/E.
Ling has also cut her earnings estimates for the FY2021 and FY2022 by 8% each due to the chip shortage.
That said, she still views the group as a “quality tech blue chip” despite the supply disruptions.
Venture has guided for a q-o-q improvement in figures for the 2QFY2021, leading to a stronger 2HFY2021.
“[Venture’s] 1QFY2021 performance was affected by supply disruptions for parts and components. Otherwise, Venture saw broad-based strength across the group’s diverse technology domains,” she writes.
As it is, Ling notes that Venture has a strong net cash position to support a repeat of its dividend of 75 cents in the FY2021, which works out to an “attractive yield” of 4%.
On this, Ling says she “remains positive on Venture’s ability to continue investing to enhance its differentiating capabilities within its ecosystems of interest in the longer term”.
PhillipCapital analyst Paul Chew has kept his target price at $19.20 as Venture’s profit growth stood below his forecast of +17%.
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“We had expected a stronger rebound from last year’s low base caused by pandemic disruptions,” he says.
That said, Chew has left his forecasts unchanged, as he is optimistic that there will be stronger revenue momentum from Venture in the coming quarters.
UOB Kay Hian analyst John Cheong has also maintained his target price of $23.47.
Unlike the other three brokerages, Cheong views Venture’s 1QFY2021 earnings as “in line”, accounting for 19% of his FY2021 estimates.
“We expect a sequential improvement, similar to the trend in 2020 as Venture works on fulfilling orders,” he writes.
“At current price, Venture offers an attractive dividend yield of 3.7%,” he adds.
Shares in Venture Corp closed 22 cents lower or 1.1% down at $19.31 – at 2.2 times price-to-book, according to DBS’s estimates.
