RHB Group Research analyst Jarick Seet has maintained his “buy” recommendation on Venture Corporation (VMS) as he expects the group to see better times in FY2022.
Seet, who has kept his target price unchanged at $20.90, added that he expects VMS’s margins to continue improving across the next few quarters.
The better margins are said to come from new product launches with “higher design content”, says Seet in a Jan 4 report.
Venture Corp’s profitability are also set to take off once key component shortages ease.
“Shipments in 3QFY2021 were impaired by sporadic lockdowns, particularly in South-East Asia, due to Covid-19. The shortages of critical chips and parts such as capacitors and even plastics exacerbated the situation,” he says.
“Despite these two impediments, VMS’s operating entities and manufacturing workforce worked conscientiously to achieve sequential improvements in revenue and net profit in 3QFY2021. However, we believe that these shortages will continue into 1QFY2022 – which will likely impact its 1HFY2022 profitability,” he continues. “Once the component shortages are solved, its revenue and profitability levels should take off.”
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The group’s new leadership structure is also seen as a positive, as it will be aligned with the group’s vision to drive its next phase of growth through various dynamic ecosystems of interests.
“Current CEO Wong Ngit Liong will step down from the position, but will continue being the executive chairman of the board. He will remain accessible to share his wisdom, aside from tapping on his connectivity and drawing on his enduring experience. He will support Lee Ghai Keen, who has been promoted to CEO from his current COO role, to grow into the new role and enhance the latter’s leadership of the group,” says Seet.
“We believe these key changes will be positive for the company’s long-term future, and will address the existing doubts regarding VMS’s succession plan,” he continues.
Shares in VMS closed 2 cents higher or 0.11% up at $18.47 on Jan 4, or 2.0 times FY2021 P/B and a dividend yield of 4.1%.
