SINGAPORE (Sept 26): RHB Research is maintaining its “buy” call on Venture Corporation on expectations of a sequential improvement in the group’s upcoming 3Q17 results, while lifting its target price estimate to $19.70 from $14.70 previously.

The research house has raised its FY17F-18F PATMI forecasts by 10%, with its latest target price implying a FY18F P/E of 19 times.

In a Tuesday report, analyst Jarick Seet notes a case of strong insider buying given Venture CEO Wong Ngit Liong’s multiple instances of purchasing the group’s shares in the open market in recent months, which the analyst believes is a testament of the company’s solid fundamentals and anticipated robust results ahead.

Following what he deems a “superb” 1H17 for Venture’s earnings, the analyst anticipates an even bigger dividend payout ratio for the full year, provided that the group’s “stellar performance” is maintained.

See: Venture Corp posts 61% rise in 2Q earnings to $69.8 mil on higher revenue

RHB therefore expects Venture’s dividend per share (DPS) for FY17 to be raised by 20% to 60 cents from 50 cents previously to reflect a 3.5% full-year dividend yields.  

Looking ahead, Seet believes Venture’s margins is likely to continue improving in the remaining quarters of FY17 after seeing its profit before tax (PBT) margin rise to 8.3% over 2Q from 7.6% previously.

This is likely to be achieved through a shift in the revenue mix to higher-margin projects, as well as its management’s continued efforts to upgrade operational efficiencies aross the value chain to lower costs, he adds.

In Seet’s view, the high receptive rate of Venture’s customers are largely due to the group’s key growth pillars of its medical, life sciences, and test & measurement units.

“We remain positive on these divisions, and expect this trend to continue for the rest of the year, as the company secures orders from new and existing customers. However, demand growth is likely to be slower due to the higher base effect,” says the analyst.

“With the strong insider buying and macro-economic demand continuing, we expect its 3Q17 results to strengthen q-o-q. With the continued value creation, coupled with new major product launches ahead in 4Q17, we expect this positive momentum to likely continue into 3Q17,” he adds.

As at 10.29am, shares in Venture Corp are trading 1.1% lower at $17.10 or 2.08 times FY18 forward book value.