Venture Corp

(Sept 11: $15.74)

MAINTAIN BUY. We remain constructive on Venture Corp’s (VMS) long-term prospects despite the current challenging operating environment, as (i) customers historically show — and continue to demonstrate — revenue resilience, (ii) end-markets appear broadly stable, and (iii) potential from growth markets, new products and higher allocations by customers as a result of the US-China trade war is intact. Based on our ROE-g/COE-g analysis, we believe its share price has priced in an FY2018-FY2021E earnings compound annual growth rate (CAGR) of -8%. We believe this to be unlikely, unless there is a full-blown recession in the US/globally. Even if FY2018-FY2021E earnings CAGR turns out to be -11%, implying a fair value of $14, we believe VMS’ FCF generation should still be able to fund DPS of 80 cents a year for a potential 5.3% yield, which should mitigate total returns downside from current levels. Price target of $18.88 (2.2x FY2019E P/BV).