Grand Venture Technology - Readying For Recovery
- Grand Venture Technology (GVT, SGX:JLB) has two factories in China, both located in Suzhou. With the dismantling of COVID-19 restrictions in China, more of its Chinese employees have become infected with the disease. However, we understand that its China plants continue to practice strict safe management measures and hence, we think production activities have not been materially impacted. A seasonally slower first quarter will also help to mitigate the situation, in our view.
- In its semicon business (58% of 9M22 revenue), we think business has remained slow as Grand Venture Technology’s customers in the back end of the semicon chain continue to see their end-customers digest excess inventories. Hence, as disclosed by Grand Venture Technology in its 9M22 business update to the public, the group’s strategy is to onboard customers involved in the front end of the semiconductor chain for which the group is making good progress on engagement with such prospective customers. We believe Grand Venture Technology has already delivered first article samples to these customers, and in our view, there could be some revenue contribution from such customers in 2H23F.
- In Penang, where many front end semicon companies have a presence, Grand Venture Technology’s production hub sits on a land area of 332,659 square feet by land area (previously 169,480 square feet) and hence, we think the group has sufficient capacity to onboard front end customers.
- We rollover our valuation to FY24F and upgrade our recommendation on Grand Venture Technology to a HOLD with target price raised to S$0.52.
- Our target price for Grand Venture Technology is based on 10.4x FY24F P/E (0.5 standard deviation below its 3-year average). Previously the 0.5 standard deviation below its 3-year average P/E multiple was 9.6x.
- Our HOLD call is premised on Grand Venture Technology’s ability to onboard new front end customers.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
William TNG CFA CGS-CIMB Research | Izabella TAN CGS-CIMB Research | https://www.cgs-cimb.com 2023-01-05 2023-01-05
Previous report by CGS-CIMB:
2022-11-08 Grand Venture Technology - Pinning Its Hopes On The Front-End.