CFA Society Singapore
SINGAPORE (Feb 12): Venture Corp will need to deliver on its guidance of a V-shaped recovery in 4Q18 to regain investors’ confidence given the unexpected earnings miss in 3Q18, says CIMB-CGS Securities.
CIMB-CGS currently estimates 4Q18 net profit of $100.7 million, down 29.6% y-o-y. As at Feb 8, consensus expectations are for 4Q18 net profit of $99.9 million, down 30.2% y-o-y. Venture will report after the market closes on Feb 22.
For 1Q19, Venture major customer Illumina guided for revenue to be lower q-o-q but sees FY19 revenue growth at 13-14% y-o-y. The disappointment in Illumina’s FY18 results was the miss in equipment unit shipments. However, Illumina, expects the multi-year upgrade cycle to remain intact as it estimates that at least 75% of its customer base has yet to switch to the current leading product.
Although Philip Morris did not guide for FY19 heated tobacco units volume, it reiterated its previous guidance of 90 billion to 100 billion unit shipments by FY20. “We think over the next two years key focus will remain on IQOS,” says Tng. As at end 4Q18, Philip Morris noted that one-third of its IQOS user base was now in markets outside of Asia.
Meanwhile, Altria Group, which owns Philip Morris’ US business, is establishing physical stores in multiple locations in the US and has already hired staff to support pre-launch activities for IQOS.
Altria is hopeful that IQOS will be approved soon for sale in the US and has included a full roll-out in its guidance. Looking into the future, Philip Morris believes that it will eventually introduce a device that can be used with different consumables such as e-vapour, heated and even nicotine.
Given the risk to global economic growth from the US-China trade war, CIMB-CGS Securities is reducing its FY20F revenue growth forecast but its target price based on 12.56x FY20F core EPS, remains unchanged at $17.44.
As at 2.45pm, shares in Venture are down 4 cents at $15.93.