Robust demand outlook
- FY21 results in line; 50Scts DPS declared
- Delivered strong 4Q21 on improving supply chain situation and COVID lockdowns
- Robust net margin of 10.5% in 4Q21 and 10% in FY21; Expect sustainable net margins of 10% ahead
- Demand momentum remains strong, with healthy order pipeline; maintain BUY and S$22.60 TP
Investment Thesis:
Expect a stronger year ahead, on easing of supply chain disruptions and robust order momentum. Despite the challenging environment, Venture was able to maintain a 10% net margin for FY21. 4Q21 was the strongest quarter, with net margin of 10.5% while net profit accounted for 30% of FY21 numbers. With a strong pipeline of orders and gradual easing of supply chain disruptions, we expect 2022 to be a strong year for Venture. We expect FY22F earnings to grow by 11%, followed by another 7% in FY23F, from 5% growth in FY21. Key growth segments include Life Science, Medical Devices, Semiconductor and Lifestyle & Wellness.
Strong financials to support dividend. A strong net cash position of S$807.9m with no debt to support at least a repeat of 75 Scts DPS in FY22, which works out to an attractive yield of c.4%. Net cash per share works out to S$2.78.
Valuation:
Maintain BUY and TP of S$22.60. Our TP of S$22.60 is still pegged to 19x PE, the peak in 2020, which is also near +2SD of its 4-year average forward PE, on FY22F earnings.
Where we differ:
We remain positive on Venture’s ability to continue investing to enhance its differentiating capabilities within its ecosystems in the longer term.
Key Risks to Our View:
Weakening client or global growth prospects. Global economic slowdown; weakening of clients’ end-demand and/or the US Dollar (USD) could dampen revenue growth.