Following indications of volume picking up, Maybank Securities analyst Jarick Seet has in his Nov 22 report raised back his target price for Venture Corp to $15.40, from $14 previously.
His previous target price of $14 was stated just over a fortnight ago on Nov 6 after the manufacturer gave its 3QFY2023 business update.
The new price target on Nov 22 brings Seet's estimate for this counter back to the level he had back in August.
Citing the company's management, Seet says that customers' inventory levels have dropped. In addition, mass production of new products has started in this current 4QFY2023 with more slated for the coming FY2024, likely leading to higher operating margins.
"As a result, we are now more confident 3QFY2023 was the bottom for Venture and expect revenue and patmi growth in FY2024," says Seet, who has kept his "buy" call.
For FY2024 and FY2025, Seet has raised his patmi projections by 7.1% and 9.8% respectively. Along with a higher PE multiple of 15x from 14.5x due to a brighter outlook, that's how Seet derives his higher target price of $15.40.
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Furthermore, Venture has a track record of maintaining its dividends at a sustainable level in both good times and bad times. With $956.5 million in net cash, Seet believes Venture can maintain the 75 cents per share payout, which translates into a yield of 5.8%.
"There is also potential to increase dividends if FY2024 performance is good due to its positive cash flow and strong balance sheet with no immediate huge capex plans," he says.
Given how Venture's share price has dropped by around a quarter year to date, Seet believes that's an over-correction.
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"With a brighter outlook, we believe Venture is undervalued at current levels trading below its historical 10-year P/E of 16x," says Seet.
"Venture has also conducted several share buy-backs, especially in October, which add conviction to our call that 3QFY2023 was likely the bottom for Venture," he adds.
Venture shares changed hands at $13 as at 10am, up 0.85%.
