RHB Group Research analyst Jarick Seet has upgraded Venture Corporation to “buy” from “neutral” with a higher target price of $20.70 from $19.60 previously.
The upgrade comes as shares in Venture Corporation fell to a 10-month low of $18.08 on June 23. Shares in Venture were previously hovering around the $19-$20 mark since January.
Venture had, on June 23, warned investors about analysts’ reports about the group, stating that said reports were untrue and based on incomplete information.
In his report on June 29, Seet said that the recent share price weakness in Venture was “unwarranted” and that this was a good opportunity for investors to accumulate this “tech laggard at an attractive level”.
Venture’s management had also conducted a few share buybacks and managed to mitigate the impact from Malaysia’s third movement control order (MCO) by anticipating the imposition of the 50% to 60% workforce limit per site.
Furthermore, Seet says he expects Venture to record a stronger 2QFY2021, marking yet another q-o-q improvement in the FY2021.
“This has been a consistent recovery across the four quarters in terms of profitability in FY2020 and we will likely see the same trend in FY2021 as we expect a continuous improvement in revenues and profitability,” he writes.
Venture has also showed broad-based strength across its customers in existing and new segments.
See also: Stronger 2QFY2021 expected for Venture Corp, though challenges still lie ahead: RHB
The group’s new products and solutions that were engineered in its research and development laboratories are scheduled to be released to end-markets in the 2QFY2021 and 3QFY2021 by its partners and customers in several technology domains including life science & genomics and healthcare & wellness.
In terms of dividends, Venture declared a 75 cent-per-share payout in the FY2020, translating to a yield of 4%, which is “highly sustainable”, says Seet.
This means that shareholders are likely to continue enjoying higher dividends should the group’s performance improves.
“We do think that FY2021 will be a better year with an earnings per share (EPS) growth of 11.8%. As a result, we upgrade to a ‘buy’ from ‘neutral’ after the recent share price weakness,” writes Seet.
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The new target price is based on 18 times Venture’s FY2021 price-to-earnings (P/E).
As at 3.30pm, shares in Venture are trading 19 cents higher or 1.0% up at $18.90, or 2.0 P/B, according to RHB’s estimates.
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