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Venture Corp's 3Q21 missed expectations, but better things lie ahead: analysts

Atiqah Mokhtar
Atiqah Mokhtar • 3 min read
Venture Corp's 3Q21 missed expectations, but better things lie ahead: analysts
Analysts are sanguine on the changes in Venture Corp's executive leadership as well as easing supply chain disruptions.
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Analysts have remained mostly positive on Venture Corp, despite its 3QFY2021 ended September results missing expectations.

See: Venture Corp reports slight sequential gain in 3QFY2021 earnings

“Venture Corporation reported 3QFY2021 revenue and NPAT of $769.9 million and $77 million which were lower than expected, mainly due to component shortage which the global industry has been facing,” comments Jarick Seet from RHB Group in a Nov 8 research note.

But Seet has maintained his “buy” rating for the counter, albeit with a lower target price of $20.90 from $23 previously. His bullishness stems from Venture’s recent leadership reshuffle, including the appointment of COO Lee Ghai Keen as the group’s new CEO, taking over from Wong Ngit Liong, who will retain his position as executive chairman.

See: Venture Corp changes executive leadership and corporate structure

“We believe these key changes are positive for the company’s long term future and will address the existing doubts regarding a succession plan for Mr Wong,” Seet comments.

See also: UOB Kay Hian sees Civmec's bid to shift domicile to Australia a positive move

CGS-CIMB Research analyst William Tng is similarly positive on the succession plan. In a Nov 5 research note, Tng also points out that Venture has also established two panels comprising specialists in selected fields to support its strategic directions.

“With two expert panels and a new CEO, the probability of accretive acquisitions occurring may be raised. Venture certainly has the balance sheet strength for acquisitions; the impediment being the high bar it sets,” says Tng.

He has reiterated his “add” call for Venture with an unchanged target price of $23.32.

See also: UOBKH keeps ‘buy’ and TP unchanged on BRC Asia, sees bullish medium-term outlook

For DBS Group Research analyst Ling Lee Keng, Venture will see a better 4Q along with a strong year ahead as supply chain disruptions ease. “The chip shortage could begin to ease in 2022, with the increase in capacity from chip manufacturers gradually coming online. With the strong pipeline of orders, we expect Venture to be able to fulfill the bulk of its orders,” she says.

Ling also points out that Venture’s production facilities in Malaysia are currently running at almost full capacity, given the high vaccination rate for its workers. “Overall, we expect a better 4QFY2021 versus 3QFY2021 and a stronger 2022 for Venture,” she concludes.

To that end, she has kept her “buy” rating for Venture, but with a slightly lower target price of $22.60 compared to $22.70 previously to reflect downward adjustments in earnings for FY2021/FY2022.

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Meanwhile, PhillipCapital Head of Research Paul Chew takes a more cautious stance on Venture, noting weak revenue for the 3QFY2021. “Venture has struggled to keep revenues to pre-pandemic levels these past two years despite the global resurgence in electronics demand. The pivot to life science and consequent long timeline to ramp up is a factor, in our opinion,” he says.

Chew has lowered his forecasts for FY2021, reflecting a stalled recovery in the 3Q due to production disruptions. Nonetheless, his target price of$19.20 remains unchanged as he rolls forwards valuations to FY2022.

He has maintained his “neutral” rating for Venture.

As at 9.12am, Venture shares are trading up 2 cents or 11% higher at $18.77.

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