A new chapter begins
? FY21 revenue/net profit were in line with our expectations.
? Grand Venture Technology (GVT) is excited about growth prospects in the coming years.
? Reiterate Add. We lower our TP to S$1.60 due to sector P/E multiple derating.
FY21 results in line
GVT’s FY21 revenue/net profit were in line with our expectations. Revenue jumped 89.3% yoy to S$116.3m while net profit grew 236.6% yoy to S$17.6m in FY21. The semiconductor segment saw yoy revenue growth of 96.1%; life sciences segment’s revenue grew 53.2% yoy while the electronics, medical and others segment’s revenue grew 109.7% yoy. The semiconductor segment accounted for 71% of FY21 revenue (FY20: 69%). The life sciences segment accounted for 16% of FY21 revenue while the electronics, medical and others segment accounted for the remaining 13%. Overall gross profit margin rose to 32.4% in FY21 from 30.8% in FY20 due to the higher revenue. Net profit was in line at 98% of our FY21 forecast. A final DPS of 0.5 Sct was declared. Together with the interim DPS of 0.5 Sct, FY21 DPS was 1.0 Sct.
Management is optimistic on FY22F outlook
Management is optimistic about its prospects in FY22F as demand from the semiconductor industry is expected to remain robust, providing support for the group’s back-end semiconductor equipment activities. GVT is looking forward to meeting the anticipated increase in demand and expanding its scope of services to include front-end activities through its existing facilities and the proposed acquisition of Johor-based precision sheet metal manufacturer Formach Asia Sdn Bhd (unlisted) which is scheduled for completion within 1Q22. The recent increase in drug discovery, vaccine production and testing activities globally has led to a corresponding rise in demand for life sciences analytical and diagnostics equipment, and this should sustain the growth momentum in the group’s life sciences business segments.
Reiterate Add on growth potential
Reiterate Add. Our TP is reduced to S$1.60 to reflect the sector de-rating (due to interest rate hike concerns). We use the current sector average P/E of 14.5x (we have removed the 10.0% discount factor given GVT’s growth prospects) in deriving our target price. Previously, we used a target P/E of 15.8x [we applied a 10.0% discount to the then (4 Jan 2022) sector average P/E of 17.5x given GVT’s smaller market cap]. Downside risks are operational disruptions (such as workers being possibly infected by Covid-19, power restrictions in its China plant, higher than expected spending for long-term growth affecting our FY22-23F net profit expectations). Re-rating catalysts are stronger-than-expected results, potential new customer wins and more accretive M&As.