Venture Corporation - Capable Of Weathering A Slowdown
- We project Venture Corporation (SGX:V03) to report a 4Q22F net profit of S$89.7m (-5% y-o-y, -8% q-o-q) likely on 24 Feb 2023.
- According to The Conference Board, a US-based global, nonprofit think tank, the US economy could head into a recession around the beginning of 2023F. The Conference Board expects to see 3 quarters of negative GDP growth for the US starting from 1Q23F, with a rebound in 4Q23F bringing 2023F real GDP growth to 0.0% y-o-y and further rebound to 1.7% in 2024F. Slowing US economic growth is a macro concern for Venture Corp as the company does have a large US customer base.
- We think Venture Corp’s net cash balance sheet with zero debt (on rising interest cost concern) will help the company manage any slowdown. Venture Corp would also be able to seize any opportunities presented by an economic slowdown given its strong S$701m cash position (as at end-Sep 2022).
- As we roll over our valuation to FY24F, our target price for Venture Corp rises to S$20.10 (S$19.62 previously) based on an unchanged 22-year average forward P/E of 15.2x. We prefer to be cautious and maintain our below-Bloomberg consensus 4Q22F net profit forecast.
- Key downside risks are
- the ongoing supply chain disruptions, which affect the availability of parts and components,
- labour shortages, and
- weakening global economic outlook.
- Potential re-rating catalysts are new product launches by customers, and improvements in component availability.
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 2023-01-06 2023-01-06
Previous report by CGS-CIMB:
2022-11-04 Venture Corporation - On Track For Recovery To Pre-COVID Net Profit.