SINGAPORE (Jan 30): As Venture Corp’s major clients are projecting optimism ahead, Maybank Kim Eng Research reckons that the electronic services provider could do better this year.
Maybank believes the company could return to y-o-y earnings growth in 2H20, underpinned by a robust pipeline of key product launches for its customers.
This is on top of consensus’ 2020 revenue forecast for Venture’s customers have been broadly unchanged through 4Q19 as trade tensions subsided, unlike the prior frequent downward revisions as trade tensions escalated.
“This suggests that [Venture’s] customer base is showing signs of operational stabilisation,” Maybank analyst Lai Gene Lih writes in a note dated Jan 29.
“If our thesis plays out, we believe [Venture] may see y-o-y earnings growth in 2H20, assuming 1H:2H seasonality of 46:54,” he adds.
To that end, Maybank has raised its FY20 and FY21 earnings per share forecasts by 6% and 8%, respectively, in line with FactSet consensus.
The brokerage has also increased its target price for Venture to $18.23 from $16.91 previously and maintained its “buy” rating for the stock.
According to Maybank, Venture’s customers have turned more positive this year, owing to their robust product pipeline, pent-up demand from delayed spending and 5G roll-out.
Key customers, such as Agilent, Thermo Fisher and Honeywell, are of the view that the economy has bottomed and are expecting this year to be better than last year, it notes.
This is in contrast to Illumina, which has guided for lower NovaSeq shipments y-o-y in 2020.
The key risk, however, is if the cautious environment persists, caused by trade, US elections and/or general manufacturing-related headwinds, says Maybank.
As at 11.11 am, Venture was up 45 cents or 2.8% at $16.59, with trade volume of 1.2 million shares.
