Strong earnings recovery expected for Venture Corp after a dismal 3Q

Strong earnings recovery expected for Venture Corp after a dismal 3Q

Michelle Zhu
05/11/18, 11:17 am

SINGAPORE (Nov 5): RHB Research and OCBC Investment Research are maintaining their “buy” calls on Venture Corp while lowering their target price and fair value estimate to $19 and $20.13, from $22.20 and $23.23, respectively.

This comes after the group last week reported a y-o-y decline in 3Q18 earnings on lower revenue.

While RHB has slashed its FY18-19F earnings per share (EPS) estimates by 10-7%, respectively, it remains confident that a V-shaped recovery is highly possible for Venture in the subsequent quarters, especially if the trade war between US and China is resolved.

The research house’s revised target price is pegged to a historical low P/E mean of 14 times, versus the previous valuation of 15.5 times FY19F P/E.

In a Monday report, RHB analyst Jarick Seet says the short-term selling pressure triggered by Venture’s recent negative results could present investors with opportunities to accumulate on the stock.

This is because the same factors the slowdown in 3Q – namely the transitory effect of Venture’s customers having new product introductions or undergoing M&A – are likely to contribute positively to a recovery in 4Q, as these new product introductions are likely to occur during the quarter, in his view.

“The customers undergoing M&A transitions should also see business activity pick up after the integration processes are completed – which will be positive for the company in subsequent quarters. All in all, management has also seen business pick up strongly across all segments. We expect it to recover strongly in 4Q18, and this may likely continue for subsequent quarters in 2019,” he adds.

Highlighting that the group managed to keep its net profit margin (NPM) at 10.5% in spite of its sharp drop in revenue in the latest quarter under the review, Seet is expecting wider NPM ahead such that Venture benefits from operating leverage.

He also expects the group to pay a dividend per share of 70 cents this year, which is slightly higher than that of FY17 and represents a FY18F yield of 4.3%.

On the other hand, OCBC is maintaining its 15 times target P/E given Venture’s stronger-than-average NPM and healthy balance sheet, although it also assumes more conservative earnings estimates for FY18 and FY19.

Its analyst Joseph Ng attributes the recent 3Q earnings disappointment to an “unfortunate confluence of negative transitory events”, but like RHB’s Seet, expects a q-o-q recovery in 4Q18.

“We are also encouraged to note that despite the macro rumblings, feedback on customer sales has been encouraging till date, with purchase orders backing up this optimism,” says Ng.

As at 11.15am, shares in Venture Corp are down by 9.8% at $14.67 or 1.8 times FY18F book value based on RHB estimates.

Annica chairman Ong quits just as JLC senior partner goes missing with $33 mil of clients' money

SINGAPORE (May 23): Jeffrey Ong, chairman of Annica Holdings, has quit with immediate effect on May 20. Ong is also the managing partner of boutique law firm JLC Advisors. According to a Business Times report, some $33 million, believed to belong to Allied Technologies, has gone missing from the clients’ accounts of the law firm. See also: Allied Tech's $130 mil purchase of dorm operator aborted amid news of missing funds At the same time, an unnamed “senior partner” of JLC, has become uncontactable, reported the paper. Ong first joined Annica’s board back in July 2008 and ....

SATS well supported by decent dividend yield, strong growth prospects: DBS

SINGAPORE (May 23): DBS Vickers Securities is remaining positive on SATS with a “buy” call and target price of $5.44, on the belief that Changi Airport and regional aviation growth will continue to drive the gateway services provider’s long-term earnings growth. This comes after SATS ended FY19 with earnings of $248.4 million, down 5% y-o-y due to the absence of one-off gains. Operating profit nonetheless came in line with DBS’s expectations at $247 million due to better operating margins, while a higher final dividend per share (DPS) of 13 cents was also declared compared to 12 ....

Regionalisation, digitalisation key to UOB's growth, analysts say

SINGAPORE (May 23): Analysts believe United Overseas Bank (UOB) will leverage technology as well as efforts to spread its wings across the region in order to ride out current macroeconomic volatilities. “[UOB’s] key differentiator remains in their Asean footprint across Malaysia, Indonesia, Myanmar, Vietnam, particularly being the only Singapore bank with a local Thailand presence,” says DBS Group Research analyst Lim Rui Wen in a flash note following UOB’s Corporate Day 2019 on May 15. “We continue to see huge potential as UOB continues to engage and tap into a different pool ....