Maybank Securities Singapore analyst Lai Gene Lih has upgraded Venture Corp to “buy” from “hold”, following the contract manufacturer’s FY2021 earnings that beat his expectations.
Plus, with supply chain woes easing faster than expected, and a “robust demand outlook” that should speed up earnings growth, Lai is comfortable enough to raise his target price to $21 from $19.18.
n Friday, Feb 25, Venture reported 2HFY2021 earnings of $171.7 million, up 3% y-o-y but a big jump of 22.3% over the preceding 1HFY2021.
Revenue for 4QFY2021 was up 9.2% y-o-y and up 17.6% q-o-q to $905.4 million. With all its workers in Malaysia, its key production base back at work following pandemic-related disruptions, plus better availability of components, Venture wasn’t as constrained in production volume.
As a sign of effective cost management amid inflationary pressures, the company was able to hold its net margin at 10.5% for 4QFY2021, versus 10% achieved for whole of FY2020.
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Venture has guided for “robust demand” from clients from life science, instrumentation, test & measurement, networking & communications, advanced industrials as well as lifestyle and wellness.
Lai notes that Venture’s share price has dropped by just 4% year to date, whereas other tech stocks covered by him has dropped by as much as 20% over the same period.
Furthermore, chairman Wong Ngit Liong, has on Nov 8 bought 200,000 shares at $18.73, signalling his confidence in the company’s prospects.
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Coupled with a yield of 4%, plus prospects of accelerating earnings growth this current FY2022, Lai believes that “the stock has bottomed and risk-reward has now turned positive.”
However, key risks might manifest in the form of worsening supply chain problems due to either the pandemic or geopolitical tensions, which might then impact global growth, warns Lai.
Photo: Venture
