Growth momentum continues
- 1Q22 slightly above expectations; revenue similar to pre-COVID level
- Continued growth momentum; steady demand outlook
- Pretax margin was strong but net margin affected by higher tax rate
- Maintain BUY with TP of S$22.70 based on 19x FY22F PE
Investment Thesis:
Growth momentum continues on the back of robust demand. Venture saw broad-based growth in most segments, a result of the sustained growth momentum from 4Q21. We expect the strong momentum to continue in the next few quarters, barring any worsening of lockdowns, especially in China. We project revenue to reach the pre-pandemic level of c.S$3.6bn but net margins to be lower, at 9.5%- 9.6%, due to supply chain disruptions, inflationary pressure, and a higher tax rate. Nevertheless, we still expect a 11%/7% growth in net profit for FY22F/23F. We remain positive about Venture, as the group continues to build on its capabilities to attract quality customers. Coupled with a nimble and dynamic structure, the group is able to respond to changes swiftly.
Strong financials to support dividend. A strong net cash position of S$815.1m as at end-March 2022 with no debt would support at least a repeat of the 75 Scts DPS in FY22, which works out to an attractive yield of c.4%. Net cash per share works out to S$2.81.
Valuation:
Maintain BUY and TP of S$22.70. Our TP of S$22.70 is still pegged to a 19x PE, the peak in 2020, which is also near +2SD of its four-year average forward PE, on FY22F earnings.
Where we differ:
We remain positive about 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.