Maybank Securities analyst Jarick Seet has downgraded Venture Corporation V03 to “hold” from “buy”, citing a darkening global economic outlook which will result in what the company’s own management calls a “challenging year”.
In contrast, Seet prefers Aztech Global, which benefits from “strong orders” from an unnamed key customer. He rates the counter a “buy” and has a price target of $1.02.
For the current FY2023 and coming FY2024, Seet has cut his earnings estimates for Venture by 10.3% and 10.2% respectively. He has also lowered his valuation multiple from 16x to 15x, leading to a revised target price of $17.32, down from $20.20.
Nonetheless, Seet, in his April 25 note, maintains that Venture Corp’s long term prospects remain sound and that he is confident the company can maintain its “excellent execution track record” even in tough times.
The company is likely to report its 1QFY2023 ended March on May 5. Seet expects the numbers to be “muted”, with top-line and bottom line drop of 5.1% and 6.5% to $843.9 million and $78.5 million.
The following product segments are likely to be weaker: networking and communications, computer peripherals, data storage, retail store solutions and industrial products as well as its printing and imaging.
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On the other hand, demand from test and measurements as well as medical and life sciences are likely to have remained strong.
Despite what is likely to be a tough year, Seet believes that the debt-free company, with $813 million of net cash, will uphold its dividend payout.
For FY2022, Venture will be paying 75 cents. “We expect dividends to be maintained at this level,
representing a yield of 4.3% for FY23E despite projecting a weaker year,” says Seet.
