SINGAPORE (Jan 15): Venture Corp’s performance this year could be dragged by a disappointing FY20 revenue guidance by US biotechnology equipment manufacturer Illumina – its major customer – according to CGS-CIMB Research.
CGS-CIMB notes that Illumina’s CEO recently guided that the latter’s revenue could grow 9% to 11% y-o-y, which is below analysts’ expectation of 12%.
The slower growth is due to lower shipments of genome sequencing equipment NovaSeq y-o-y, Illumina guided.
Still, CGS-CIMB notes that Illumina intends to launch new products this year.
Illumina is projecting 500 units of NextSeq 1000 and NextSeq 2000 to be shipped in FY20, it notes.
On the broader front, CGS-CIMB believes that the supply chain diversion – as a result of the trade tensions between the US and China – currently presents few benefits to Venture.
It explains that the revenue contribution arising from the production diversion will take some time to grow in “significance”, owing to delays in corporate decision-making by customers.
For now, CGS-CIMB expects Venture to report lower 4Q19 earnings of $85.5 million, down 20.6% y-o-y.
This will lower the brokerage’s full-year earnings forecast for Venture to $352.4 million, down 4.8% y-o-y, from the company’s FY18 earnings of $370.2 million.
CGS-CIMB expects Venture to declare a final dividend per share of 50 cents.
“Upside risks are successful new product launches by its customers, while slower orders from customers are a key downside risk,” CGS-CIMB analyst William Tng writes in a note dated Jan 14.
CGS-CIMB has maintained its “hold” rating for the stock with an unchanged target price of $16.88.
As at 12.36 pm, shares of Venture traded down 10 cents or 0.6% at $16.51.
