Venture Corp
Price target:
RHB “neutral” $19.60
Stronger 2QFY2021 expected for Venture Corp, though challenges still lie ahead
RHB Group Research analyst Jarick Seet has maintained “neutral” on Venture Corporation (Venture Corp), with an unchanged target price of $19.60.
While the group had anticipated that its workforce would be limited during the third round of Malaysia’s movement control order (MCO) from June 1 to June 14, Seet deems Venture Corp's valuation to be high “at this point” with weak earnings potential.
“In May 2021, Venture’s business groups had anticipated the imposition of the 50% to 60% workforce limit per site,” writes Seet in a June 9 report.
“A task force — comprising Venture’s business leaders, site general managers, and human resource representatives — held several conference calls, to formulate mitigating action plans that would support the group’s endeavour to fulfil customers’ committed orders while remaining in compliance with the Ministry of International Trade and Industry’s (MITI) directives,” he adds.
While Seet remains neutral on the counter, he has identified several positives including Venture Corp’s new products and solutions that are scheduled for release to end-markets throughout this year by partners and customers in several technology domains.
“These include fast-growing domains and ecosystems such as life science and genomics, healthcare and wellness as well as Covid-19-related detection, testing and diagnostic products and solutions,” he writes.
“Demand for medical devices and equipment, networking and communications, and semiconductor correlated modules and equipment also appear unabated,” he adds, noting that these areas of growth will “likely carry forward” into FY2022.
The group, which has experienced consistent recovery across the past four quarters, will likely see the same trend in FY2021, where Venture Corp may mark improvements in revenue and profitability.
Seet is anticipating a stronger 2QFY2021 for the group and is positive on their preference for long-term stable and sustainable dividends.
The group declared a 75 cents payout for the FY2020, representing a dividend yield of 3.9%.
“We think this is highly sustainable and shareholders are likely to continue enjoying higher dividends if the group’s performance further improves,” says Seet.
That said, he also notes that there are challenges such as the slowing economic growth and a worsening of the US-China relationship may lie ahead and could pose key risks to the group. — Felicia Tan
Grand Venture Technology
Price target:
CGS-CIMB “add” $1.12
1H2021 net profit to grow more than 50%
CGS-CIMB Research analyst William Tng has reiterated his “add” call for Grand Venture Technology (GVT) ahead of its 1HFY2021 ending June results, which will be released in mid-August.
Tng believes that GVT will report net profit growth of more than 50% y-o-y for the 1HFY2021 following a surge in sales of semiconductors globally in April to US$41.8 billion ($55.3 billion), up 21.7% y-o-y and 1.9% m-o-m.
“SIA noted that the y-o-y growth was driven by rising sales across a range of chip products and throughout each of the world’s major regional markets,” says Tan in a June 10 research note.
In addition, Tan says that the World Semiconductor Trade Statistics industry trade group has forecasted worldwide industry sales at US$527.2 billion, up 19.7% y-o-y.
To that end, Tng views GVT will be a beneficiary of the strong semiconductor sales projected, considering that its semiconductor segment made up 71% of GVT’s 1QFY2021 revenue.
In addition, he notes that Malaysia’s third movement control order will not likely have a material impact on the group’s performance, given that it has obtained a permit from authorities to continue operating during the lockdown period.
Its Penang facility will remain operational, subject to a 60% workforce limit constraint. Tng has kept his $1.12 target price for GVT unchanged, derived from a FY2021 P/BV multiple of 5.37 times.
Key risks to his rating and target price are shortfalls in revenue forecasts due to work stoppages at factories run by GVT or its customers due to measures to contain the Covid-19 pandemic, while re-rating catalysts include strong-than-expected results and accretive mergers and acquisitions. — Vivian Yee
Sasseur REIT
Price target:
DBS Group Research “buy” $1.10
Chinese luxury market boom to drive tenants’ sales
DBS group research analysts Geraldine Wong and Derek Tan have maintained a “buy” call on Sasseur REIT with an increased target price of $1.10, from 89 cents previously.
They “reiterate [their] ‘buy’ call with a higher discount cash flow (DCF)-based target price of $1.10 after increasing their portfolio tenant sales growth from 3% to 5% and modelling interest rate savings of 120 basis points p.a. In the recent round of refinancing”, they write in a June 13 report.
The Chinese luxury market grew 48% y-o-y in FY2020 as consumption was brought “onshore”.
Wong and Tan say they raised their “growth estimates for Sasseur REIT as one of the best placed REITs to ride on the China luxury market boom”.
“Half of the luxury spending by the Chinese is usually expensed abroad but had been brought onshore last year as international travel is primarily halted for now,” they add.
Wong and Tan’s report states that “tenant sales growth forecast increased from 3% to 5% as we expect spillover effect into the luxury outlet mall market”.
“Tenant sales spiked 113% last quarter on a low base, recovering to c.94% of normalised levels and doubling the variant component of rents in 1QFY2021, ahead of expectations,” they write.
They also “forecast tenant sales to recover back to FY2019 levels by the end of this year”.
However, the analysts say they are “maintaining conservative tenant sales estimates” as they are “omitting organic and inorganic growth opportunities this year which will pose as further upside to our earnings”. Additionally, they also note of possible risks such as the “tightening pandemic measures following a second wave of new Covid-19 infections involving imported cases”. — Vivian Yee
iX Biopharma
Price target:
PhillipCapital “buy” 44.5 cents
Expanded product use and capacity to provide stock catalysts
PhillipCapital analyst Paul Chew has reiterated his “buy” rating for iX Biopharma with an unchanged target price of 44.5 cents in a June 14 research note.
This follows recent developments announced by the company, including the grant of an orphan drug designation by the US Food and Drug Administration (FDA), the expansion of its wafer production capacity as its Australian facility and a rights issue to raise $9.56 million by issuing 48.8 million shares at 20 cents each.
The FDA grants orphan drug designations to support the development of medicines for rare diseases. Recipients are entitled to benefits such as a shorter time frame for drug approval, tax credits and research grants.
In iX Biopharma’s case, the designation — which it received in May — relates to the potential application of its Wafermine product for the treatment of Complex Regional Pain Syndrome (CRPS). If iX Biopharma receives approval for Wafermine to be administered to CRPS patients, the company can enjoy seven-year market exclusivity and possible higher drug pricing.
To that end, Chew is positive on the potential for Wafermine to be expanded from its current use which includes acute pain and depression to also include CRPS.
On June 2, iX Biopharma had announced that it will expand wafer production capacity at its Australian facility by six times, with commercial production expected to commence in July.
Chew notes that the new capacity has been factored into his forecasts, which is intended to meet the increasing demand for the company’s Entity and Xativa products.
Entity has been gaining traction in China, while Xativa has been approved as a prescription medicine under Australia’s Special Access Scheme and Authorised Prescriber Scheme.
Chew’s unchanged target price is based on a discounted cash flow valuation, with a weighted average cost of capital of 10%. Post-rights issue, his target price stands at 42.8 cents.
“Catalysts include any out-licensing deal for Wafermine Phase Three clinical trials, revenue contributions from Entity and Xativa and the commercialisation of Wafersil for the treatment of male erectile dysfunction in China,” he adds. — Atiqah Mokhtar
Singapore Exchange
Price target:
CGS-CIMB “add” $11.61
Evolving into one-stop-centre of investing solutions
CGS-CIMB Research analyst Andrea Choong is bullish on Singapore Exchange (SGX) as it rolls out its multi-asset strategy to capture customers.
“We think that SGX is on the cusp of connecting the dots in its multi-year journey to build a comprehensive one-stopcentre of investing solutions,” Choong says in a June 12 research note.
She reiterates her “add” call for the counter with an unchanged target price of $11.61 that is pegged to FY2022 ending June price earnings ratio of 25 times.
Choong notes that SGX aims to leverage on cyclical trends, which include a low interest rate environment and inflationary concerns.
SGX also intends to cater to secular trends, including a rising focus on ESG (environmental, social and corporate governance) investing, higher demand for digitalisation in over-the-counter (OTC) foreign exchange and fixed income, and growth in passive investing.
To that end, SGX has pursued a robust multi-asset offering across its three key segments of equities, fixed income, currencies and commodities (FICC) and data, connectivity and indices (DCI) — either by organically building solutions in-house or through acquisitions and strategic partnerships.
Other initiatives include offering risk management tools for improving portfolio ESG performance, building an integrated FX marketplace across futures or OTC with BidFX, rolling out a digital bond issuance and trading platform via MarketNode and Trumid XT and its acquisition of a stake in Scientific Beta.
Choong believes these actions may differentiate SGX from its peers and given the rollout, he also notes that SGX is targeting high-single-digit revenue growth in the medium term, predominantly driven by Scientific Beta and BidFX as operations scale up. “Both entities are profitable — a positive indication towards achieving the revenue target, in our view,” she adds. SGX expects its revenue mix from the equities, FICC and DCI segments to shift towards 60%, 25% and 15% respectively in the medium term, compared to the 67%, 19% and 14% in 1H2021 ended December 2020.
Given SGX’s strong balance sheet, Choong also notes that it does not discount mergers and acquisitions. “We are reassured that further acquisitions will likely be accretive, given SGX’s positive track record with BidFX and Scientific Beta,” she adds. — Atiqah Mokhtar
