SINGAPORE (Feb 27): Electronics services provider Venture Corp is flying high after a stellar 2016.
Venture saw earnings increase 20.6% to $54.1 million in the fourth quarter on the back of higher revenue, bringing full year earnings up 17.3% to $180.7 million.
Revenue for the quarter grew 23.1% to $854.6 million, from $694 million a year ago.
(See also: Venture Corp posts 20.6% rise in 4Q earnings to $54.1 mil on higher revenue)
“[Venture] had a great FY16 through value creation, gaining more traction with existing and new customers, as well as lowering costs through research & development (R&D) initiatives,” says RHB analyst Jarick Seet in a Monday report.
“We believe Venture’s outlook continues to be bright, despite a challenging macroeconomic environment, and expect a better FY17 ahead for the company,” Seet adds.
RHB is keeping its “buy” call on Venture, with a higher target price of $11.20, from $9.90 previously.
DBS Group Research analyst Sachin Mittal says Venture’s evolving business mix, with increasing contribution from the growing test, medical and life sciences segment, could lead to better margins on contracts.
In addition, Venture could also benefit from the weakening ringgit against the Singapore dollar, as close to 60% of its staff cost is incurred in Malaysia.
“Along with the improvement in margins due to business mix, the impact of lower costs we expect FY17 EBITDA to increase to 9.1%, compared to 8.6% in FY16,” Mittal says in a Monday report.
DBS is keeping its “buy” call on Venture, with a higher target price of $11.37, from $10.90 previously.
Maybank Kim Eng Research analyst Gregory Yap believes the only “slight disappointment” from Venture’s results was from its unchanged dividends payout.
Venture had maintained a full year DPS of 50 cents per share, which was lower than Maybank’s forecast of 55 cents.
“With rising profits, the payout ratio fell from close to 90% of net profit in FY15 to just 76% in FY16.,” say Yap. “If the current earnings trajectory continues to be as strong as we project, payout will fall to 54% by FY19, assuming a DPS of 50 cents.”
Nevertheless, Yap says yield is still decent even with a DPS of 50 cents.
Maybank is keeping its “buy” call on Venture, with a higher target price of $11.50, from $11.00 previously.
Indeed, UOB Kay Hian analyst Jonathan Koh notes that Venture’s payout ratio and dividend yield are “above market rate”.
“Venture has provided attractive total return with the stock gaining 19.9% in 2016 and 4.5% year-to-date in 2017, Koh says in a Monday report, adding that Venture’s dividend yield of 5.3% is one of the highest in the technology sector.
“We believe management is conservative and wants its dividends to be sustainable,” Koh says. “Uncertainty has increased due to the Trump Administration’s policy toward international trade.”
UOB is keeping Venture at “buy”, with a higher target price of $12.40, from $11.00 previously.
As at 4.11pm, Venture Corp is trading 7 cents higher at $10.39.
