Venture Corporation share price: Why did DBS lower its target price to S$22.70?

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  • Shares of Venture Corporation Ltd (SGX: V03) are down 4.4% at S$19.45 since Friday (April 30, 2021)
  • And this despite the fact that the group announced a growth in its net profit of 8.3% in the first quarter of 2021.
  • DBS analysts reiterated a “buy” on the tech solutions provider’s shares this week, while lowering the price target to S$22.70
  • Venture expects quarter-over-quarter improvement in the second quarter of 2021
  • Buy and sell Venture Corp stock with an IG account

Venture Corp stock price: what’s new?

Shares of Venture Corporation have fallen 4.4% since announcing its first quarter 2021 results on Friday (April 30, 2021).

The technology solutions provider reported an 8.3% year-on-year growth in net profit for the first quarter of 2021 to S$65.3 million. The net profit margin also increased from 9% in the first quarter of 2020 to 9.5% in the first quarter of 2021.

The widening profit margin was “despite tepid revenue growth due to global parts and component shortages,” the group shared in a Singapore Stock Exchange filing. Revenue increased by 2% to S$686.7 million in the first quarter of 2021.

DBS analysts maintained a buy call on the stock on May 5, 2021, while lowering their price target to S$22.70 from S$24.30 previously. The price target is pegged to a price-to-earnings (P/E) ratio of 20.5x on FY2021 earnings, within +2SD (standard deviation) of its five-year average P/E ratio.

The researchers noted that Venture’s performance in the first quarter of 2021 “was impacted by parts and component supply disruptions.”

Nonetheless, they believe the company’s product portfolio remains strong, with the group working to launch new products in instrumentation, networking and communications, advanced industrial products and advanced semiconductor-related equipment. .

Analysts are also confident the company has strong financials to support a repeat dividend payment of S$0.75 per share in fiscal 2021. This will result in “an attractive yield of approximately 4%,” they said.

Risks, however, include weakening customer or global growth prospects due to a global economic slowdown and weakening sentiment towards the US dollar.

What are the company’s next steps?

Earnings per share for the quarter were S$0.224, up 7% from S$0.208 in the first quarter of 2020.

Looking ahead, the group expects a quarter-on-quarter improvement in the second quarter of 2021, as well as a stronger performance in the first half of 2021 compared to the previous year.

“Venture’s customer orders show widespread strength across the group’s various technology areas,” he said.

Customer orders for life science technologies, medical technology devices and equipment, and consumer technologies for lifestyle and well-being “are also up sharply.”

While the group is experiencing a strong order pipeline, continued disruptions in the supply of parts and components have also resulted in fulfillment issues. In response, the company says it has set up several task forces to manage its global supply base.

“In addition to regular communications with our operations teams to develop solution strategies, these groups also implement joint initiatives with various external stakeholders such as our customers and partners, suppliers and component manufacturers, to secure parts and components to meet our shipping plans,” Venture mentioned.

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