Venture Corporation
Price targets:
$16.88 HOLD (CGS-CIMB Research)
$17.00 OUTPERFORM (Macquarie Global Research) $17.18 ACCUMULATE (Phillip Securities Research) $16.30 NEUTRAL (RHB Group Research)
Venture Corp’s performance this year could be dragged by a disappointing FY20 revenue guidance by its major customer, US biotechnology equipment manufacturer Illumina, according to CGS-CIMB Research.
CGS-CIMB notes that Illumina’s CEO recently guided that the latter’s revenue could grow 9% to 11% y-o-y, which is below analysts’ expectation of 12%.
The slower growth is due to lower shipments of genome sequencing equipment NovaSeq, Illumina guided.
Still, CGS-CIMB notes that Illumina intends to launch new products this year.
On the broader front, CGS-CIMB believes that the supply chain diversion – as a result of the trade tensions between the US and China – currently presents few benefits to Venture.
The brokerage explains that the revenue contribution arising from the production diversion will take some time to grow in “significance”, owing to delays in corporate decision-making by customers.
For now, CGS-CIMB expects Venture to report lower earnings of $85.5 million for 4QFY2019 ended December 2019, down 20.6% y-o-y.
This will lower the brokerage’s full-year earnings forecast for Venture to $352.4 million, down 4.8% y-o-y from earnings of $370.2 million a year ago.
CGS-CIMB expects Venture to declare a final dividend per share of 50 cents.
“Upside risks are successful new product launches by its customers, while slower orders from customers are a key downside risk,” CGSCIMB analyst William Tng writes in a note dated Jan 14.—