Positive Outlook, Exciting Future Plans And Strengthened Management Team
Venture has reiterated a bullish outlook, with exciting future plans and a strengthened management team showing clear succession planning in its latest annual report. This is consistent with our BUY call on the back of: a) robust demand outlook, b) positive growth guidance from customers that we track, and c) attractive valuation of 2022F excash PE of 13x vs its clients’ average PE of 29x along with a dividend yield of 4.6%. Maintain BUY and target price of S$22.80.
WHAT’S NEW
• At the crossroads of another transformation. With over three decades of growth since its establishment in 1989, we believe that Venture Corporation (VMS) is at the crossroads of yet another transformation. Over the years, it has gained good traction in selected ecosystems of interests, becoming a leading technology partner of choice for over 100 global companies. It manages a portfolio of more than 5,000 products in the space of life sciences, medical equipment, lifestyle and wellness, test and measurement, networking etc. With the post pandemic climate accelerating advancements in selected high-growth technology domains, VMS is excited about the opportunities it can leverage to capture value.
• Exciting pipeline of new products. In 2021, VMS made various achievements in new product introductions, including new analytical instruments within the life sciences domain. Growing trends in next-generation sequencing and molecular diagnostics will open up new market potential for its customers and VMS hopes to support them in these new market segments. In the lifestyle and wellness technology domain, VMS is supporting the launch of a new platform of next-generation devices which are expected to come to market in 2022. Positive market momentum is also visible in other domains, where VMS has a strong foothold, namely instrumentation, test & measurement, networking & communications, advanced industrials, and semiconductor-related equipment.
• Clear succession planning with experienced management team. In Nov 21, VMS announced changes to its executive leadership team. Effective 1 Jan 22, Mr. Wong Ngit Leong has stepped down as CEO while remaining as Executive Chairman of the Board. Lee Ghai Keen, who is appointed CEO, has been with VMS for over 20 years now and has led the group’s R&D efforts and global operations over the years. Wong Chee Kheong, who was previously the Senior Vice President of the Group’s Healthcare and Wellness Business, Global Supply Base Management & IT, is now the new COO. As VMS sets its sights on growing its presence, both Ghai Keen and Chee Kheong will spearhead VMS’ next phase of growth under the guidance of the board. With their combined experience of over 38 years in VMS, the company is confident that the duo will be able to successfully lead the group in the years ahead. In addition, two panels comprising specialists in selected fields have been established to support VMS’ strategic directions.
STOCK IMPACT
• VMS remains positive on its long-term growth as it continues to engage and collaborate with successful and innovative customers in various high-growth, fast expanding market segments.
• Strong balance sheet and good dividends provide limited share price downside. As of end 21, VMS recorded net cash of S$808m (accounting for about 15% of its current market cap) and led the pack of US-listed peers which were mostly in net debt positions. More importantly, VMS has consistently paid the same amount of dividends or better than that in the preceding years.
• Positive guidance of key customers:
- Broadcom: Expects 1Q22 revenue growth of 14% yoy.
- NCR: 2022 guidance of 12-15% yoy revenue growth and 27-39% yoy EPS growth.
- Agilent: 2022 guidance of 7% yoy revenue and EPS growth.
- Fortive: Expects 2022 revenue growth of 7% yoy.
- Keysight: Expects 2022 revenue growth of 5% yoy.
- Illumina: Expects 2022 revenue growth of 14-16% yoy.
- Waters: Expects 2022 revenue growth of 6% yoy.
- Philip Morris: Expects 2022 revenue growth of 4-6% yoy and EPS growth of 8-11%.
EARNINGS REVISION/RISK
• We maintain our earnings forecasts.
VALUATION/RECOMMENDATION
• Maintain BUY and target price of S$22.80, pegged to +1SD above its forward mean PE, of 19.5x on 2022F earnings. Currently, VMS offers an attractive dividend yield of 4.6%.