Analysts have generally maintained their positive view on Venture Corp after the bluechip manufacturing services firm reported better-than-expected earnings for 1HFY2022.
For the six months to June 30, Venture Corp reported earnings of $174 million, up 24% y-o-y. Besides growing the topline, the company was able to maintain its net margins at 9.7% — despite cost pressures inflicted on the global economy.
“The strong growth was due to growth across all the domains and its ability to overcome supply-side challenges, including global supply chain constraints, rising inflationary pressures and a tight labour situation,” writes UOB Kay Hian’s John Cheong in his Aug 8 note.
The fact that Venture was able to maintain its net margins is a testament of its “differentiating capabilities and pricing power”, indicates Cheong, who has a “buy” call on the stock, with a higher target price of $23.54, up from $22.80 previously.
Besides a better-than-expected 1HFY2022, the company is guiding for a better second half. Ling Lee Keng of DBS Group Research writes: “We remain positive on Venture, as the group continues to build on its capabilities to attract quality customers. Coupled with a nimble and dynamic structure, the group is able to respond to changes swiftly.”
Besides keeping her “buy” call on the stock, Ling has raised her target price to $23.20, pegged to 19 times earnings. Her previous call was for $22.70.
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Lai Gene Lih of Maybank Securities expects Venture Corp to be “resilient” and “broad-based”, with customers in the current 2HFY2022 to be from the life science and genomics, healthcare and wellness, networking and communication, as well as semiconductor industry segments. Lai, who has a “buy” call on the stock, now sees it worth $22.90, up from $21 previously.
Similarly, Jarick Seet of RHB has raised his target price as well, from $22.80 to $23.30, on the back of a 2% increase in FY2022 earnings seen. “Management anticipates demand to remain unabated in 2HFY2022, and expects this to mitigate supply-chain constraints,” writes Seet in his Aug 8 note.
Paul Chew of Phillip Securities has kept his “buy” call and while he has similarly raised his target price, it is a relatively restrained $20.80, from $20.
See also: Investors turn positive on Venture Corp on share buybacks and higher revenue guidance of customers
From the perspective of UOB Kay Hian’s Cheong, there are several reasons Venture Corp stands out relative to other companies in this field, especially in the way the company deals with the industry-wide problem of supply-chain kinks.
First, Venture Corp is redesigning its products to reduce dependency on parts that are in shortage.
Next, the company is working with customers to obtain a longer order forecast for better procurement and production planning; and thirdly, it is increasing stockpiling of inventories and sharing the working capital burden with customers. “Combined with the strong design and R&D capabilities of Venture Corp, the company is able to provide unique solutions to win market share and clients that are of high quality amid this uncertain environment,” writes Cheong.
William Tng of CGS-CIMB differs somewhat from his peers. He has kept his “add” call but has also kept his target price at $23.32, given how this target price was already at a more bullish level than most. Possible reasons to re-rate the stock, as seen by Tng, include new product launches by customers, which will lift order volume, as well as improvements in component availability.
