Amanda Tan and Ling Lee Keng of DBS Group Research have kept their "buy" call on Grand Venture Technology JLB following its FY2023 results.
However, they've slightly reduced their target price to 58 cents, from 60 cents on reduced margin assumptions for the current FY2024 and coming FY2025.
For the year ended Dec 2023, Grand Venture reported earnings of $5.5 million, down 58.4% y-o-y. Revenue in the same period was down 15.1% y-o-y to $111.3 million as the company bore the downturn of the semiconductor cycle that hit everyone in the industry.
As a result of the lower earnings, the company plans to pay a total dividend of just 0.1 cents for FY2023, slashed from 0.6 cents paid for FY2022.
"Notwithstanding near-term volatility, the semiconductor industry is well poised for growth, owing to the push towards digitalisation," the analysts state in their Feb 27 note, as they describe how this company is "a promising grand venture nonetheless."
Part of their optimism stems from the company's revenue guidance of between $58 and $64 million for the current 1HFY2024, with the midpoint of this range 13.2% higher versus 1HFY2023.
Tan and Ling add that the management "remains cautiously optimistic" for operating conditions in the semiconductor and electronics industry to improve from 2HFY2024 onwards.
In FY2023, the semiconductor business accounted for 47.9% of Grand Venture's revenue, down from 55.4% in FY2022.
The company's life sciences segment, which generated 20.6% of its revenue in FY2023, is also expected to remain healthy while a recovery in air travel should bode well for the aerospace segment.
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"Consequently, we retain our views of a better 2HFY2024 and believe the share price has more upside potential as the industry turns," add Tan and Ling.
Nonetheless, to better account for the semiconductor industry recovery seen to take place only in 2HFY2024, as well as "muted" near-term margins, the analysts have reduced their earnings projections, which leads to a reduced target price of 58 cents which is pegged to 18x earnings.
"Overall, we believe that Grand Venture remains prepared to deliver when orders come in but is presently constrained by cautiousness within the industry, which should abate from 2HFY2024 onwards," the analysts state.
