Venture share price: analysts raise targets despite coronavirus

Venture share price at a nine-month high

Singapore technology product and services group Venture Corporation is currently trading at a nine-month high share price of S$17.14 a share.

Despite last week’s coronavirus-driven sell-off that had affected markets everywhere (including Singapore blue-chips), Venture – a 12,000-person strong company with more than 30 subsidiaries and affiliates spread across Southeast Asia, Northeast Asia, America and Europe – was one of few companies that managed to fend off the negative momentum.

That was thanks in large part to the fact that the group had released its full-year earnings for 2019 on the very day that the outbreak started to worsen.

Read also: Top 5 Singapore stocks to buy in March 2020

Venture’s dividend for 2019

While net profit for the 12 months ended 31 December 2019 fell slightly by 1.8% to S$363.4 million from S$370.1 million in the preceding year, this appeared to be enough to cushion the massive worldwide stock sale of 27 February.

Looking at just the fourth quarter and a quarterly comparison, post-tax profit was up 13% from Q3 to S$96.3 million in Q4. This translates to an annualised net margin of 10.0% for 2019, as compared to 10.6% in 2018.

Earnings per share worked out to be S$0.1253 for the entire year, versus S$0.1273 in 2019; and S$0.333 for the reported quarter, down from S$0.371 one year before.

The Board of Directors is proposing a final one-tier tax-exempt dividend of S$0.50 per share for the 2019 financial year, slated to be paid out on 22 May 2020.

Including the interim dividend of S$0.20 per share paid in September 2019, total dividend for 2019 will amount to S$0.70 per share. This is unchanged from the final dividend payout in 2018.

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On the coronavirus outbreak: supply chain ‘disrupted’

With regards to COVID-19, the company said that China’s quarantine measures to contain the outbreak has disrupted the global supply chain, including that of Venture’s. Venture’s Chinese facilities contribute less than 10% of its total output, according to OCBC research.

The group is hoping that things will pick up from the second quarter of 2020 onwards, stating that it ‘expects to be able to fulfil most, if not all, of customers’ orders, including backlog’ in Q2.

It also anticipates a stronger second half of 2020, supported by traction with its new and existing partners.

For now, with most of its manufacturing footprint concentrated in Southeast Asia, Venture is confident that it is well-positioned to capture new business opportunities as businesses continue to diversify their global supply chain network.

‘Production capacity from the Group’s Clusters of Excellence outside of China, which forms the majority of Venture’s manufacturing footprint, remains intact,’ the group said in a press release.

Read also: Top 5 Singapore blue-chips impacted by the coronavirus

Analysts raise calls on Venture Corporation

Six out of six analysts rating the stock have increased their target prices.

CIMB’s William Tng raised his revenue forecast for the group’s 2020 and 2021 financial seasons by 4.6% on the back of the company’s ‘positive guidance’ regarding the second half of 2020.

He upgraded his call on the stock to ‘accumulate’ from ‘hold’ previously, while increasing the target price to S$17.66 per share from S$16.88.

Still, he cautioned that there are downside risks, including slower orders from customers and the impact from a worsening of the coronavirus outbreak.

DBS’ equity research team had upgraded their rating to a ‘buy’ on a higher share price estimate of S$18.50 per share (up from S$17.20), stating that the Venture’s ‘current valuation is attractive 12.5x on FY20F earnings, below its 10-year average price-to-earnings ratio of 13.9x’.

OCBC has given a fair value estimate share price of S$18.09 per share, derived from a five-year mean target P/E ratio of 13.9x.

OCBC analysts highlighted in a note that Venture Corp could ‘potentially benefit from customers seeking alternative manufacturing partners who possess facilities ex-China for supply chain resilience and diversity’.

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