SINGAPORE (May 2): Maybank Kim Eng is maintaining its “buy” call on Venture Corp after its 1Q results came in above expectations, where net profit rose 36% on-year in a very strong start to the year.
1Q17 net profit accounted for 23% of Maybank’s previous full-year forecast. Historically, 1Q is Venture’s lowest quarter of the year at less than 20% of full-year results.
Maybank has therefore lifted its target price by 16% to $13.35 following upward revisions to EPS estimates in FY17/18/19.
“We expect the early momentum to be sustained in 2017 based on its broad-based growth, particularly from the Life Sciences segment where leading customers, such as Illumina have launched new products,” says analyst Gregory Yap in a Tuesday report.
Yap notes that the gene sequencing customer is benefiting from a strong customer upgrade cycle, driven by its latest NovaSeq sequencer. In addition, Venture’s Test & Measurement/Medical & Life Sciences segment jumped 79% from a year ago to account for a record-high 52% of revenue.
Other than Medical and Life Sciences, Networking & Communication revenue also grew by a strong 22% y-o-y in 1Q17, reflecting robust equipment demand by cloud providers, while Retail Store Solutions also grew a decent 8% y-o-y. Overall growth segments accounted for 90% of total revenue, up from just 58% a year ago. Barring unforeseen circumstances, Maybank Kim Eng expects this strong momentum to continue for the rest of the year.
“We raised our EPS forecast for FY17 by 11% and FY18/19 by 4-5%to reflect stronger than expected revenue momentum and stable margins. We value Venture at 16x earnings, in line with 1x its 3Y EPS CARG of 16% and its sector peer PE average of 16.5x.
Shares of Venture are up 41 cents at $12.61.
