Venture Corp has reported FY2024 earnings in line with expectations; its most recent 2HFY2024 ended Dec 31 2024 has shown recovery. However, given the uncertain macro outlook, orders from customers have become more uncertain. As such, analysts have trimmed their respective target prices for the stock to reflect lower earnings estimates.
Venture is at various stages of implementing new business wins in design and manufacturing. However, the current 1QFY2025 is likely to remain weak and a turnaround is only seen in 2HFY2025, says Jarick Seet of Maybank Securities.
"Customers still not ramping up orders due to macro-environment factors," says Seet, who has kept his "hold" call.
As such, he has trimmed his earnings forecast for the current FY2025 and coming FY2026 by 12.8% and 12.6% respectively. With his valuation multiple kept at 15x, his target price has been trimmed to $12.40 from $12.60.
John Cheong and Heidi Mo of UOB Kay Hian, citing further delays in Venture's earnings recovery because of the uncertainties, have downgraded their call from "buy" to "hold" along with a lower target price of $13.35 from $15.55.
Nonetheless, there are reasons to still like this stock.
See also: DBS is RHB’s top pick with dividend yield ‘too good to ignore’
Despite the lower earnings, Venture has kept its final dividend at 50 cents per share, bringing the total payout for FY2024 to 75 cents, equivalent to a payout ratio of 89%. The company's net cash has also increased from $1.1 billion in FY2023 to $1.3 billion in FY2024.
"We reiterate our 'add' call on Venture as we believe the company’s fundamentals remain strong," says William Tng of CGS International, who has nonetheless trimmed his target price from $15.30 to $14.95 on the "still-cautious demand outlook".
Ling Lee Keng of DBS Group Research has trimmed her earnings forecast by 2-3% on "near-term" challenges in the consumer and life sciences segments, leading to a new target price of $14.70 from $15.10. Her "buy" call remains.
Nonetheless, she expects Venture to be a key beneficiary of the so-called China+1 strategy adopted by many manufacturers amidst the trade war that could potentially escalate.
"With its manufacturing facilities primarily in Malaysia (Penang and Johor), Venture is well-positioned to capitalise on this growing trend," says Ling, who expects Venture to report a better 2HFY2025 versus the current 1HFY2025.
Similarly, Alfie Yeo of RHB Bank Singapore has trimmed his earnings forecast, leading to a new target price of $14.70 from $15.40, along with his "buy" call. "Nonetheless, we expect growth to be driven by new business wins across its various domains," says Yeo.
Venture Corp closed at $12.60 on Feb 28, down 1.41%.
