Before the release of Venture Corp’s 2Q2020 results on August 7, DBS Group Research analyst Ling Lee Keng is optimistic that the ‘worst could be over’ for the company due to recovering supply chains close to recovering to their pre-Covid levels.
The optimism also comes based on the recently-released results from industry leaders.
On that, Ling has upgraded her recommendation on Venture Corp to “buy” from “hold” with a higher target price of $20.70 from $15.90 previously. The target price is currently the highest “on the street”, and that the current share price has already surpassed the most bullish target price predicted.
“We continue to expect Venture to emerge stronger from this pandemic. Venture’s expertise and its entrenched relationship with industry leaders in the various technology domains, coupled with its balance sheet strength, provide a strong foundation for the group to obtain sustainable growth,” Ling writes in a report dated August 5.
Ling’s positivity comes against the neutral to negative consensus, although she remains positive on the company due to its ability to continue to enhance its differentiating capabilities within its ecosystems of interest.
“Investors should focus on the longer-term benefits and look beyond the near-term earnings volatility, especially during this pandemic period,” she adds.
Ling has forecast earnings per share of $1.11 and net distribution per share (DPS) of 70 cents for FY2020F.
Conversely, RHB analysts Jarick Seet and Lee Cai Ling have placed Venture Corp “under review” from “neutral” before the release of its 2Q20 results.
Seet and Lee are not as optimistic as DBS’s Ling on its performance due to the closure of its factories in Malaysia caused by the country’s Movement Control Order (MCO), as well as social distancing measures in Singapore.
While the analysts expect April’s numbers to remain weak, they anticipate improvements in Venture Corp’s performance moving forward, due to the re-opening of its factories and global supply chains following the lifting of social distancing measures.
By end-April, most of Venture Corp’s operating entities received exemptions to operate without constraints.
On that, Venture Corp says it expects to record stronger 2H2020 numbers supported by its new and existing partners. It also expects to gain momentum from new partners in the life sciences, genomics, and healthcare and wellness industries. Contributions from these partners are expected to increase after 2020, say Seet and Lee.
“As of 1Q2020, Venture has a net cash position of $852.5 million, and will likely be able to sustain its dividends – just like it did during the last financial crisis, even though revenue and profits fell. We expect a 3.9% dividend yield for FY2020,” say Seet and Lee.
“1Q2020 and part of 2Q2020F will likely be marked by a short-term blip caused by COVID-19. We anticipate the company’s results to rebound in the next few quarters, and for it to emerge stronger than its competitors – due to its sturdy balance sheet, as well as the implementation of key initiatives,” they add.
Seet and Lee have forecast a target price of $15.10 for the stock, with EPS of $1.01 and DPS of 70 cents for FY2020F.
As at 4.27pm, shares in Venture Corp are changing hands 72 cents higher, or 4.0% up, at $18.86.
