Venture Corp

Price target:

DBS Group Research “buy” $24.30 Maybank Kim Eng “buy” $23.27 CGSCIMB “buy” $24.84 PhillipCapital “neutral” $18.60

Stars are aligning for Venture to venture into its recovery

Venture Corp reported earnings of $80.2 million for its latest 3QFY2020 ended Sept 30, down 5.9% y-o-y. However, analysts are positive on the company’s outlook as they see the leading contract manufacturer poised for a steady recovery, thanks to strong demand from its customers across various sectors.

In her Nov 9 report, DBS Group Research’s Ling Lee Keng kept her “buy” call, with a revised target price of $24.30 versus $20.70 earlier. “With its diversified geographical footprint, Venture is poised to benefit from the shift in supply chain. Beyond FY2020, demand momentum is expected to remain strong,” she says.

Similarly, Maybank Kim Eng’s Gene Lih Lai kept his “buy” call but with a significantly raised target price of $23.27 from $18.46 previously. “During the 3QFY2020 reporting season, a common theme was customers’ broad-based optimism towards new products and pipeline. We are excited by this as it signals positive end-market receptivity. This corroborates with Venture’s expectation for new products to be released from its R&D labs into manufacturing throughout 2021, including in fast-growing domains,” says Lai, referring to sectors such as life science & genomics, medical devices & equipment, healthcare & wellness, networking & communications and semiconductor equipment.

CGS-CIMB’s William Tng continues to rate Venture a “buy” with a higher target price of $24.84, from $20.14. He expects Venture to benefit from higher demand for the I Quit Ordinary Smoking (IQOS) e-cigarette it makes on behalf of Philip Morris, which plans to introduce newer variants in the coming quarters and into more new markets. By the end of September 2020, the number of IQOS users had reached 16.4 million, up 1.1 million q-o-q and up 4.1 million y-o-y.

On the other hand, PhillipCapital’s Paul Chew is more conservative on Venture. He has a “neutral” call on the stock with a target price of $18.60, as he sees orders in 3QFY2020 were softer than expected. “Moving into 2021, we anticipate a recovery led by new products that Venture mentioned would be released by customers. These will likely be in the healthcare sector, including Covid-19-related detection, testing and diagnostic products. Another driver of growth could be an improvement in macro conditions,” he adds.