RHB Group Research analyst Jarick Seet has maintained “neutral” on Venture Corporation (VMS) with an unchanged target price of $19.60.

While the group had anticipated that its workforce would be limited during the third round of Malaysia’s movement control order (MCO) from June 1 to 14, Seet deems VMS’s valuation to be high “at this point” with weak earnings potential.

“In May 2021, VMS’s business groups had anticipated the imposition of the 50% to 60% workforce limit per site,” writes Seet in a June 9 report.

“A taskforce - comprising VMS’s business leaders, site general managers, and HR representatives - held several conference calls, to formulate mitigating action plans that would support the group’s endeavour to fulfil customers’ committed orders, while remaining in compliance with the Ministry of International Trade and Industry’s (MITI) directives,” he adds.

While Seet remains neutral on the counter, he has identified several positives including VMS’s new products and solutions that are scheduled for release to end-markets throughout 2021 by partners and customers in several technology domains.

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“These include fast-growing domains and ecosystems such as life science & genomics, healthcare & wellness, as well as Covid-19-related detection, testing, and diagnostic products and solutions,” he writes.

“Demand for medical devices & equipment, networking & communications, and semiconductor correlated modules & equipment also appear unabated,” he adds, noting that these areas of growth will “likely carry forward” into the FY2022.

The group, which has experienced consistent recovery across the past four quarters, will likely to see the same trend in FY2021, where VMS may mark improvements in revenue and profitability.

As such, Seet is anticipating a stronger 2QFY2021 for VMS.

Seet is also positive on VMS’s preference for long-term stable and sustainable dividends.

The group declared a 75 cents payout for the FY2020, representing a dividend yield of 3.9%.

“We think this is highly sustainable and shareholders are likely to continue enjoying higher dividends if the group’s performance further improves,” says Seet.

That said, challenges such as the slowing economic growth and a worsening of the US-China relationship, which could pose key risks to VMS, may lie ahead.

As at 4.43pm, shares in VMS are trading 6 cents higher or 0.3% up at $18.86, or 2.1 times P/B, according to RHB's estimates.