Riding a post-Covid recovery; BUY
1Q22 PATMI of SGD84m (+28.6% YoY) beat our and consensus estimates,
accounting for c.24% of our full year forecast (1Q historically accounts for
c20-22%), driven by broad-based growth. Maintain BUY with unchanged TP
of SGD21.00 (17.2x FY22E P/E) as we see earnings recovery this year
towards pre-Covid levels (2019: SGD363m) as a catalyst, as this narrative
contrasts other tech plays globally where demand slowdown is a key
concern.
Broad-based growth drives strong momentum
Revenue grew 29.5% YoY to SGD889.3m on the back of broad-based growth
(6 out of 7 domains registered growth). Despite inflationary pressures, PBT
margin was healthy at 11.5% (+0.6ppt QoQ, -0.6ppt YoY), which was
attributed to Venture’s differentiating capabilities versus competitors and
cost control, among others. Effective tax rate rose from 12.9% to 18.0%,
primarily due to lower incentives in Singapore after the global minimum
tax rate agreement. Within growth domains, advanced payments and
healthcare & wellness stood out in 1Q22, largely catalysed by the
reinvigoration of retail and hospitality sectors globally amid re-openings.
Living with challenges
Venture expects the near-term operating environment to remain
uncertain. Amid a still strong demand backdrop, some ways to mitigate
supply-side challenges include holding higher levels of inventory to ensure
availability of components, and component redesign. For the latter,
enabling factors are i) having design content within an extensive range of
products, and ii) customers’ trust and close working relationship over
many years.
Bright demand outlook
Customers’ orders and forecasts continue to point towards a robust and
steady outlook across multiple domains, such as wellness, life science,
instrumentation, test and measurement and advanced industrial. In our
view, the key risks remain the material worsening of supply chain issues
and inflation.