Venture

Re: Venture

Postby winston » Thu Apr 26, 2018 1:59 pm

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The Smoke Has Cleared

Market Cap: USD4,894m

Venture's 1Q PATAMI surged 72.2% YoY, while net margin expanded to 9.8% (from 5.8%) despite the weakening USD.

Seasonally, 1Q is the weakest quarter, making up <20% of its PATAMI, so we expect margin
expansion to continue for subsequent quarters.

However, we are cautious of the slowdown in the electronics and semiconductor industry and trim FY18F earnings by 5%.

This results in a lower TP of SGD26 (from SGD30.50, 15% upside), pegged to a lower 17.2x P/E (from 19x). However, we think that the selldown is overdone and maintain our BUY call.

Source: RHB
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Re: Venture

Postby winston » Fri Apr 27, 2018 10:06 am

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Analysts slash target prices for Venture Corp despite 1Q earnings surge

By Stanislaus Jude Chan

SINGAPORE (Apr 26): Analysts are slashing their target prices for Venture Corporation by as much as 25%, just one day after the electronics manufacturer posted a 72.2% surge in earnings for the 1Q ended March.

“Given the current poor sentiment and concerns over earnings growth for tech manufacturing services companies arising from the trade/tech tensions between the US and China, valuations are likely to revert to the historical mean,” says CIMB Research analyst William Tng.

“Even a good company cannot fight market sentiment,” he adds.

As such, CIMB is lowering its valuation of Venture to an 11-year average price-to-earnings (P/E) ratio of 15.4 times, from 17.7 times previously.

CIMB is keeping its “add” rating on Venture, but cutting its target price to $25.64, some 16.8% lower than the previous target of $30.81.

Already, Venture has seen its stock price retreat by around 22% over the past week, after its customer Philip Morris International (PMI) reported slower-than-expected growth in sales for its IQOS heat-not-burn electric cigarette devices in Japan.

“PMI management commented that it is an issue of speed of growth and not decline in sales, and reiterated PMI remains on track to meet their full-year sales target for IQOS,” says OCBC Investment Research lead analyst Eugene Chua.

“We estimate PMI contributed approximately 10% of [Venture’s] FY17 revenue. Hence, it seems unjustifiable for the plunge in [Venture’s] share price, which suggests wiping out more than PMI’s contribution to [Venture],” he says.

OCBC is keeping its “buy” call on Venture, but lowering its fair value estimate to $30.00, from $34.00 previously.

Meanwhile, Credit Suisse has downgraded Venture to “neutral”, from “outperform” previously, and slashed its target price by a hefty 25% to $24.00 on the back of limited earnings visibility and lack of near-term catalysts.

“What is more significant is the disappointment in the main [test & measurement (T&M)]/Medical segment where there is limited visibility of near-term growth acceleration,” says analyst Dawei Lee.

Credit Suisse is reducing its revenue growth forecasts to 5-8% for FY18-20, and lowering its earnings estimates by 7-13%.

Conversely, UOB Kay Hian analyst Foo Zhi Wei opines that broad-based growth in Venture’s T&M/Medical and Network/Communication segments are likely to continue.

“We note that its clients in the key T&M/Medical segments such as Agilent, Keysight and Thermo Fisher are expecting strong revenue growth, with consensus forecasting 10-16% y-o-y growth for all three clients,” says Foo.

“Networking and communication is also expected to see strong double-digit revenue growth, driven by Broadcomm,” he adds. “These will likely be the key focus for growth post the unexpected demand slowdown for IQOS in Japan.”

However, Foo says that a lack of clarity over a recent short sell report has “severely damaged” market sentiment on Venture.

“Management did little to address issues raised in the short sell report, and weakened sentiment has resulted in a multiples de-rating,” Foo says. “The market will likely de-rate [Venture’s] valuation until greater clarity is achieved.”

UOB is keeping is “buy” call on Venture, but lowering its target price to $25.00, from $30.60 previously.

RHB Research lead analyst Jarick Seet, however, believes that the selling over the past few days has been overdone.

Venture is “one of the few in the Singapore tech sector reporting a positive 1Q18,” Seet says.

“Going forward, the signs of slowdown have appeared in some of its peers, as well as in the semiconductor industry. It has not affected Venture yet, partially, in our view, due to its well-diversified client base,” he adds.

RHB is maintaining its “buy” recommendation on Venture, but lowering its target price to $26.00, from $30.50 previously.

On a more positive note, Maybank Kim Eng Research analyst Lai Gene Lih opines that Venture’s growth prospects remain favourable.

“We continue to believe that [Venture] has multifaceted growth drivers and see the recent correction as an even more attractive opportunity to ‘buy’,” says Lai. “Management reiterated that growth remains broad-based across its 100 active customers.”

In addition, Lai says a sustained pick-up in research and development could portend interesting FY19/20 prospects.

Maybank is keeping its “buy” call on Venture, but cutting its target price to $28.83, from $31.20 previously.

As at 3.58, shares of Venture are trading 12 cents down at $22.45. According to Maybank valuations, this implies an estimated price-to-earnings ratio of 15.3 times and a dividend yield of 2.9% for FY18.

Source: The Edge

https://www.theedgesingapore.com/analys ... e-91832885
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Re: Venture

Postby winston » Tue May 08, 2018 9:52 am

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Venture (VENM.SI) Citigroup maintains BUY with TP S$31.74 unchanged

Alert: Customer Diversity Remains A Key Cornerstone

Making sense of numbers — Venture’s stock price has retraced 29% from its peak, driven by
slower-than-expected uptake in Philip Morris International (PMI)’s Reduced Risk Products
(RRP)/investors’ fear of “concentration risk” crimping Venture’s 2018 growth.

However, studying PMI’s past results gives us better sense of the degree of concentration risk. Our calculation indicate that given the 3.3m iQos devices PMI sold in 2017(plus assuming COGS
prices between 40-60% of retail prices) translates to revenue contribution no more than 6% of
Venture’s 2017 revenue.

Doubling these units for channel inventory still gives revenue concentration near to 12%, far from the fearful 30% cited by investors. PMI had published that it was “supply-constrained” 2017 and planned a second supplier by early 2018 – i.e. these were planned transitions.

Reiterating Venture's diversified customer base — This calculation implies much less
“concentration” risk than that feared. We believe Venture has a diversified customer base with
more than 100 active customers, with only 1 customer above 10% (which has been the case since
2013), with its top 10 customers accounting for ~50% of group revenue.

Historically, Venture has leaned on margins/reduced asset intensity/capex investments to drive profitability (rather than growing revenue).

1Q18 results: Strong margins drove profitability, NPAT growth 72% YoY — NPAT margins 9.8%
(1Q17: 5.8%) Neutralising impact from FX, we est. NPAT margins would hit double digits.

1Q18 cash conversion cycle was higher at 102 days (the last time it was at this level was in
3Q16). At the results briefing, this was alluded to higher inventory/raw materials in support of
customer ramps in 2Q/3Q.

Implications — Venture continues to execute towards being a higher growth firm, with life
science and industrial clients (that continue to exhibit growth across 2018). Venture's continued
growth coupled with its cash generative business model continues to like the stock.

PER valuations now 9% discount to Singapore’s market average but with earnings growth at least
twice better. Ex-div date May17th.

Source: Citi
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Re: Venture

Postby winston » Tue May 08, 2018 11:07 am

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According to The Business Times, the value chain intrigue at Venture Corp ($20.65, up $1.05) deepens, with some non-tradional sources framing the debate most fiercely inside the information void created by Venture’s firm refusal to give the market even the slightest glimpse into its top-secret customer relationships.

Over the weekend, an online report from an anonymous writer offered an impassioned defense of Venture, arguing that it deserves to trade at a higher price-to-earnings ratio than other electronics manufacturing services (EMS) peers such as Hon Hai, given that Venture’s margins are
top-of-the-class owing to its more diversified customer base.

Venture shares had crashed 32 per cent over the previous 10 sessions, first on news that a smokeless tobacco device that it makes for Philip Morris was not selling out as quickly as hoped for in Japan. On April 24, the first anonymous online report surfaced, claiming that Venture
derived a whopping 30 per cent of revenue from Philip Morris in 2017.

On April 25, Venture reported first quarter earnings that trailed street expectations by 6-8 per cent, exactly as the report’s writers, the “Valiant Varriors”, had predicted.

With Venture keeping to its oath of EMS omerta and no sell-side analyst stepping up to refute the Valiant Varriors report directly, the masked writer of the weekend rebuttal signed off as “the true Valiant Warrior”, no less.

It’s no surprise that different people have very different ideas about what goes on behind Venture’s factory walls, given that Venture is notoriously secretive about its customer relationships.

The lack of public information means that plenty of assumptions have to be made, so the handful of investors and analysts that The Business Times has spoken to each think that the next guy’s numbers are “way off the mark”. In the more aggressive camp, the Valiant Varriors estimate that Venture sold about 13.5 million IQOS (“I quit original smoking”) units to Philip Morris last year for S$1.2 billion, or 30 per cent of 2017 group revenue.

The last research house to publish a note on the matter was CiƟ group, which took a more conservative count. CiƟ analysts estimated last week that Philip Morris sold only 3.3 million IQOS devices in 2017: “Assuming COGS (cost of goods sold) prices between 40-60 per cent of retail prices translate to revenue contribution no more than 6 per cent of Venture’s
2017 revenue.”

CiƟ added: “Doubling these units for channel inventory still gives revenue concentration near to 12 per cent, far from the fearful 30 per cent cited by investors.”

In response to queries from BT, the Valiant Varriors stood by their calculations: “For newer product launches, it is very common for FMCG (fast-moving consumer goods) companies to prepare higher inventory levels... IQOS is a relatively new product and they could be buying more for marketing and promotions (free test products for example).

What they actually sell into the market may not be that related to how much they procure from Venture. That’s also the reason why they are cuƫting back on orders for 2018. Too much inventory in their channels and sales have plateaued.”

Given the extremely secretive nature of Venture’s management on their customer base and product mix, it is little wonder that estimates range widely in the public market. And with Venture’s stock price having performed amongst the best in the FSSTI Index last year (having slightly more than doubled), expectations were high for them to perform at least in line with expectations for 1Q’2018.

In hindsight, the 8% miss which caused the stock price to plummet 30 plus percent was likely overdone and explains management’s first stock buy-back (since July’2016) executed yesterday, costing them S$2.26 million (having bought 109,000 shares at $20.73/share).

Venture’s $700million net cash position (accounting for 8-9% of its current market cap) means that they are in a position to continue to do more share buy backs if management deems
it appropriate.

And at 13-14x consensus earnings estimates currently, it is already trading below its historical average PE level of 15x and yields about 3%. Thus, we see further price weakness below the $20 level as a good opportunity to “accumulate” the stock.

Source: Lim & Tan
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Re: Venture

Postby winston » Thu Jul 19, 2018 3:01 pm

Multiple cyclical headwinds

Assuming coverage with UNDERPERFORM (from Neutral) and target price of S$14.50 (from S$24). While Venture has made credible efforts to develop next-gen products and drive margin improvement, we believe iQOSled revenue growth has peaked, and escalating trade tensions present downside risks to earnings outlook.

Earnings uncertainty to drive further derating. While consensus revenue growth expectations are more moderate at 7% in 2018-20, net margin expectations are still close to peak at 9.5-9.8%.

Our 2018-20E EPS are 9-20% below consensus, driven by more cautious revenue and margin
forecasts. Our target price of S$14.50 is based on 11x P/E, 0.5 standard deviation below historical average.

Key upside risks include revenue growth from IoT adoption, prudent cost management, and share buybacks.

Source: CS
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Re: Venture

Postby behappyalways » Mon Jul 23, 2018 1:44 pm

Philip Morris' low profit warnings put heat on Venture
https://sbr.com.sg/manufacturing/news/p ... at-venture
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Re: Venture

Postby behappyalways » Sat Aug 04, 2018 1:06 pm

Venture reports 40.2% higher 2Q earnings of $98 mil on better margins
https://www.theedgesingapore.com/ventur ... er-margins
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Re: Venture

Postby winston » Mon Aug 06, 2018 9:41 am

Venture Corp: The adventure continues

Venture Corporation Ltd (VMS) delivered a good set of 2Q18 results.

Revenue for the quarter fell 6.0% YoY to S$952.3m, though we understand that growth would have been flat in US$ terms.

We estimate that core PATMI grew 35.9% YoY to S$95.3m, forming 23.0% of our full-year estimate, which we deem to be within expectations.

We understand from management that the trade-war tensions have had little impact on the group’s top-line, and have in fact created some tailwinds for the group.

Moving forward, we remain confident of the group’s ability to deliver net profit margins of 9-10%.

With a change of covering analyst, we switch to a target P/E valuation and employ a 15x multiple, thus lowering our FV from S$30.00 to S$23.23.

We believe such a multiple is reasonable as compared to peers such as Hon Hai and Flextronics, who trade at implicit consensus target P/E of ~12.5x, yet command much lower forecasted net margins of 2.4% - 2.8%.

Source: OCBC
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Re: Venture

Postby winston » Mon Aug 06, 2018 11:12 am

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Venture Corp (VMS SP, BUY, TP: SGD22.20)

IQOS Rumours Set Straight
Company Update

Maintain BUY with a new SGD22.20 TP from SGD26.00, 31% upside – pegged to 15.5x (from 17.2x) FY18F P/E.

We attended an analyst briefing with management and came away bullish.

Venture reported strong 2Q18, which debunked IQOS rumours, with PATMI up 40.2% YoY despite -6% YoY in revenue.

This was due to higher margins from a change in business model to have more designing content in products produced, own proprietary product yielding 16-20% net margins and cost optimising throughout the company.

Source: RHB

https://research.rhbtradesmart.com/atta ... fd7dc1.pdf
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Re: Venture

Postby winston » Mon Nov 05, 2018 9:01 am

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Venture Corp posts 27.5% drop in 3Q earnings to $80.8 mil on lower revenue

By Stanislaus Jude Chan

SINGAPORE (Nov 2): Venture Corp reported a 27.5% drop in earnings to $80.8 million for the 3Q ended September, from $111.4 million a year ago, on the back of lower revenue.

3Q18 revenue fell 27.4% to $770.4 million, from $1.06 billion a year ago.

The decline was mainly attributable to the impact arising from customers’ planned transition to new replacement products and some customers’ M&A activities for the reported quarter.

As at end Sept, cash and cash equivalents stood at $714.2 million.

Looking ahead, Venture Corp says it anticipates that new product introductions from several customers are expected to drive healthy revenue improvement sequentially in the next quarter.

The group also expects to capture revenue contribution from several new customers in the next quarter, with improving traction in subsequent reporting periods.

Further, the group believes that business momentum should pick up again after certain customers’ M&A integration processes are completed.

Shares in Venture closed 81 cents higher, or up 5.2%, at $16.26 on Friday.

Source: The Edge

https://www.theedgesingapore.com/ventur ... 401b309bc7
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