+ Increase in dividends With the increase in net cash to S$833mn as at Jun20 (Jun19: S$760mn), the interim dividend for 1H20 increased to 0.25 cents (1H19: 20 cents).
+ Gross margins surged. 1H20 gross margins stood at 26.6%m almost 2% point increase YoY. This was a surprise despite the lower revenues and economies of scale. Reason for the higher margins was due to the difference in product mix.
2H20 is expected to be stronger than 1H20 which essentially lost one month of revenue. We expect some spillover of uncompleted orders to occur into 2H20. Venture mentioned a number of new products to be released in early 2021.
Downgrade to NEUTRAL from ACCUMULATE with higher TP of S$18.40 (prev. S$16.60)
We raised our FY20e PATMI by 5% and valuation metric to account for the higher visibility in the recovery as the lockdown eases.