(Oct 4): CIMB Research is keeping Venture Corp at “add” with higher target price of $20.87 after raising its earnings per share and price earnings multiple to reflect Venture’s strong order momentum from its customers.
In a Tuesday note, analyst William Tng says Venture, the global provider of technology services, products and solutions, has always been focused on profitability and has never incurred losses since its listing in 1992.
Today, the group has a well-diversified customer base and manages a portfolio of more than 5,000 products and solutions, while continuing to expand into new product categories, competing on its ability to bring value addition to customers rather than on pricing.
Venture has enjoyed strong earnings momentum in the past three quarters, driven by its success with customers in the life science/medical/others fields. Growing demand for data connectivity could also provide growth opportunities for Venture as its networking & communications segment has market-leading customers in this field.
“We expect 2H to be stronger than 1H for FY17F, in line with the past three years’ trend. We also expect the positive momentum to lift FY18F earnings above the FY07 record high of $300 million,” says Tng.
For the past 13 years, Venture has maintained a DPS of at least 50 cents. The average dividend payout ratio over these past 13 years was 82%, much higher than CIMB’s dividend payout ratio assumptions of 55%/48%/44% in FY17/18/19F, based on the continuation of 50 cents DPS.
“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, S$0.60 DPS for FY17F is a possibility, in our view,” says Tng.
CIMB is therefore raising Venture’s FY17-19 EPS by 3.2-5.5% to reflect strong order momentum. The house is also raising its P/E multiple to 17.3x from 15.2x, given its 25% EPS CAGR over FY16-19 based on its estimates.
Shares in Venture Corp are up 35 cents at $18.18.
