SINGAPORE (July 10): OCBC is maintaining its “buy” call on electronics provider Venture Corporation with an unchanged fair value of $13 after the stock price corrected 9.7% to $11.80 at market close last week on Friday.
In a Monday report, lead analyst Eugene Chua says he continues to like the stock for its strong balance sheet, stable cash flow, and stable earnings growth momentum.
Chua believes the recent pullback, which is in line with the movements seen in the US for technology stocks, presents opportunities for investors to accumulate as it translates to a forward dividend yield of about 4.7%.
Venture has been in a net cash position since FY2008, which the analyst highlights has allowed the group to maintain its annual dividends of at least 50 cents per share, even during the global financial crisis period.
Its diversified revenue and customer base of close to 200 customers across different industries also implies there is no significant revenue concentration risk on a single customer, he adds.
Looking ahead, Chua expects Venture’s Test & Measurement/Medical & Life Science/Others (TMO) segment to drive revenue growth, and opines that there is much headroom for the group to raise its dividend above the usual 50 cent-per-share rate, assuming that the group has no competing needs for cash.
“Having recorded a strong start to FY17, Venture’s long-term positive outlook remains intact as we expect margins improvement to persist as its strategy of value creation for customers continues to bear fruit, coupled with continuous efforts to increase productivity. This strategy is also the reason that places Venture in a better position in terms of margins relative to its peers,” says the analyst.
See: Venture Corp 1Q earnings up 36% to $48.6 mil on higher revenue
At 10.24am, shares of Venture Corp are trading 0.85% higher at $11.90.
