CGS-CIMB Research analyst William Tng has kept “add” on Venture Corporation V03 with a lowered target price of $15.90 from $16.61 previously. The lower target price was attributed to a lower earnings per share (EPS) estimate for the FY2025 but is still based on 14.6 times Venture’s FY2025 P/E and its 15-year average.
While the analyst still likes the counter for its dividend yield of 5.46% over FY2023 to FY2025, he predicts lower earnings for the same period.
Tng’s report dated Jan 24 comes ahead of Venture’s FY2023 ended Dec 31, 2023 results, which will be announced on Feb 22. “We think FY2023 net profit could fall 27.9% y-o-y to $266.6 million as customers’ orders could remain weak,” he writes. In the 4QFY2023, Venture’s net profit could come in at $66.3 million, down 35.4% y-o-y and flat q-o-q, according to Tng’s calculations.
The analyst is basing his estimates on Plexus’ Jan 16 announcement where the company said that it would not meet its revenue guidance for the 1QFY2024 ended Dec 31, 2023, as it saw continued market-driven inventory corrections and an incrementally weaker demand from the healthcare and life sciences as well as industrial market sectors. Plexus previously guided for its 1QFY2024 revenue to be within the range of US$990 million ($1.33 billion) to US$1.03 billion. Instead, it now expects to make between US$980 million to US$985 million in revenue, 1.0% to 4.4% lower than its previous guidance.
“We think the read-through from Plexus is that 4QFY2023 demand environment could similarly remain weak for Venture,” says Tng.
With the Bloomberg consensus lowering its revenue growth expectations for Venture’s customers, Tng has lowered his FY2023 to FY2025 revenue forecasts by 0.5% to 2.0% “to be conservative”. His EPS forecasts for the same period were also reduced by 1.3%, 7.2% and 4.3% for the FY2023, FY2024 and FY2025 respectively. Revenue growth expectations by the Bloomberg consensus slowed from 1.24%, 5.20% and 7.81% for the FY2023, FY2024 and FY2025 as at Oct 6, 2023, to 0.72%, 2.58% and 6.85% as at Jan 17.
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“Similarly, for Venture’s Lifesciences customers, Bloomberg consensus FY2023 – FY2025 revenue growth expectations (as at Oct 6, 2023) of 0.16%, 5.71% and 7.83% have now slowed to -2.95%, 0.51% and 7.33% as at Jan 17,” Tng notes.
In the meantime, the analyst has kept his dividend per share (DPS) forecasts of 75 cents over FY2023 to FY2025.
As at 1.26pm, shares in Venture are trading 24 cents lower or 1.73% down at $13.64.
