Venture Corporation Limited – As weak as during the pandemic November 6, 2023 258

PSR Recommendation: NEUTRAL Status: Maintained
Last Close Price: 14 Target Price: 12.50
  • 3Q23 PAT was down 35% YoY to S$63mn. The results were below expectations. 9M23 revenue and PAT were 70%/69% of our FY23e forecast. Soft demand and inventory adjustment continue to weigh down on revenue and earnings.
  • The pace of decline should narrow in 4Q23e as contributions from new product introductions and supply chains transition from China to SE Asia.
  • We cut our FY23e revenue and PATMI by 7% and 8%, respectively. We maintain our NEUTRAL recommendation. Our target price is lowered to S$12.50 (prev. S$15.20) due to our cut in earnings and a reduction in our PE ratio to 13x (prev. 15x). Venture’s valuation continued to de-rate as growth has stuttered over the past five years. The dividend yield of 6% is attractive and sustainable with its cash hoard of S$956mn.

 

 

The Positive

+ Recovery in net cash. Net cash recovered by S$255mn YoY in 3Q23 to S$956mn. Inventory declined by S$304mn YoY to a still elevated S$949mn. Inventory is high compared to pre-pandemic levels of around S$700mn.

 

The Negatives

– Weakness in margins. There was no disclosure of gross margins this quarter. But assuming interest income was similar to prior quarters, operating margins declined by at least 1% point. This was despite staff costs declining around 9% YoY.

 

– Revenue slump. Revenue growth remains problematic for Venture. 3Q23 revenue of S$706mn is trending around supply chain pandemic levels.

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About the author

Profile photo of Paul Chew

Paul Chew
Head of Research
Phillip Securities Research Pte Ltd

Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.

He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.

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