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Venture’s 1Q expected to be positive, keep ‘buy’: RHB

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RHB has kept a target price of $22.80 for the stock.

RHB Group Research analyst Jarick Seet has maintained his “buy” rating and an unchanged target price of $22.80 on Venture Corp, expecting that its upcoming 1QFY2022 results (ending March) should be “positive”.

This is due to its backlog from 4QFY2021, strong demand across most of its segments, and coupled with the component shortages slowly easing, Seet says. “As a result, we do think that FY2022 will enjoy a stronger performance than the one in the previous year.”

Despite the Covid-19-induced lockdown in Shanghai, Seet is forecasting a net profit after tax (NPAT) of $78 million to $82 million for the 1QFY2022.

Elaborating on the component shortages, Seet says that a number of component types - such as the Field Programmable Gate Arrays (FPGA) – continue to face shortages right now.

An FPGA is an integrated circuit designed to be configured by a customer or a designer after manufacturing and can be utilised in a wide range of applications including medical, defence and wireless communications.

Separately, he notes that other components are seeing the situation easing, and although Venture’s management thinks the company is not completely out of the woods yet, they do see the situation improving.

On Venture’s part, its research and development (R&D) team also managed to redesign products to reduce usage of some components which are facing shortages. Furthermore, several task forces have been established in prior years to manage these disruptions and have managed to get more components from existing and new suppliers.

This allowed Venture to grow more revenue than before due to their strong innovation and value add.

Moving forward, Venture anticipates a robust demand outlook based on customer orders and forecasts across various technology domains, especially in the semiconductors space. In the life science domain, demand for products in the area of analytical instruments remains strong.

Seet also says that positive market momentum is also visible across domains such as instrumentation, test and measurement, networking and communications as well as advanced industrials, where several new product introductions are expected.

Customers in the lifestyle and wellness sectors also have provided positive demand guidance.

At 11.02am, shares of Venture Corp were trading at $16.89, with a FY2022 P/B ratio of 1.8x and dividend yield of 4.4%

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