Analysts have largely kept their calls on Venture Corp, following the manufacturer's FY2023 ended Dec 31, 2023 earnings that did not turn up surprises.
Despite lower earnings, the company is maintaining its final dividend at 50 cents, bringing the full-year payout to 75 cents, implying a yield of 5.3%.
In his Feb 23 note, Maybank Securities' Jarick Seet, citing the management, flags that the second half of the current FY2024 should be "stronger" than the current half ending June, as the production of new products commences.
Venture is also confident it can maintain net margins at between 8 and 10% for FY2024.
The company continues to see "significant" growth opportunities in ecosystems such as life sciences, test and measure instrumentation, hyperscale data centres, semiconductor equipment, advanced industrial, networking & communications.
In the current 1QFY2024, Venture has also started new products in the luxury lifestyle and wellness domains.
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Even as Seet has kept his "buy" call, he has slightly raised his target price to $15.80 from $15.50, pegged to an unchanged 16 times forward FY2024 earnings, to take into account revised earnings estimates.
John Cheong and Heidi Mo of UOB Kay Hian, on their part, have maintained their "buy" call and $16.37 target price on the stock.
They note that Venture is actively expanding the range of services it can provide, to include also design, sourcing and supply chain management.
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"This will deepen collaboration with many of Venture's class-leading customers," state Cheong and Mo in their Feb 23 note.
William Tng of CGS International calls the company a "free cash flow generator", citing how it now has no borrowings, sits on a record cash hoard of $1.06 billion while free cash flow similarly hit a record $473.9 million.
Similarly to Seet, Tng has slightly raised his target price to $15.93 from $15.90, after he projects higher earnings per share to take into account a smaller share base following a series of share buybacks. His valuation multiple is kept at 14.6 times.
Ling Lee Keng of DBS Group Research is more bullish than her peers.
In her Feb 23 note, she flags how Venture is on the path to recovery and with its diversified product mix and blue-chip customer base, Venture is in a sweet spot to capture new opportunities in emerging technology domains.
With an eye on the longer term, Venture continues to invest and develop new differentiating capabilities across multiple technology domains to pave the way for future growth, she adds.
From her perspective, the strong cash balance will come in useful when Venture wants to capture new opportunities for its next growth phase.
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Her new target price of $16.90, from $15.10 previously, is based on 16 times FY2024 earnings, which, thanks to the improving outlook, is a higher multiple versus 14x accorded previously.
Paul Chew of PhillipCapital has kept his "neutral" call after Venture's FY2023 results stood within his expectations at 99% of his forecast.
While Venture's outlook noted that softness in revenue will persist into the 1HFY2024, its outlook for the 2HFY2024 looks to be sequentially stronger. On this, Chew has upped his FY2024 earnings estimates by 2% to $287 million.
His target price is also raised slightly to $12.75 from $12.50 based on a two-year historical P/E ratio of 13 times.
"The dividend yield of 5.5% is reasonable, and the balance sheet is healthy, with record cash holdings of $1 billion. Visibility to earnings growth is poor and depends on customer confidence to launch new products," he writes.
RHB downgrades to 'neutral'
RHB Bank Singapore analyst Alfie Yeo has downgraded Venture to "neutral" from "buy" as he sees Venture's near-term prospects as already priced in.
While Venture's FY2023 results stood in line with his expectations, Yeo expects the company's immediate quarterly earnings to remain soft, on continued customer destocking. Its valuation is also like to hold at the -1 standard deviation (s.d.) level without further earnings decline.
"Sequential earnings should improve in 2HFY2024 after customer destocking tapers," Yeo writes.
"As such, we believe the stock has priced in its immediate term prospects. While longer-term prospects are positive on an improving macroeconomic outlook, we look for better visibility on the completion of customer destocking is vital before turning positive," he adds.
In addition to his downgrade, Yeo has lowered his target price to $13.90 from $14.70.
