On track for recovery to pre-Covid net profit
- Venture’s revenue increased 32.8% yoy to S$1,022.6m in 3Q22, 10.3% above our S$927.47m expectation.
- Net profit grew 26.4% yoy to S$97.4m in 3Q22, 9.5% above our S$88.99m expectation.
- We reiterate our Add call with a TP of S$19.62 as we see Venture’s net profit returning to pre-Covid (FY18-19) levels over FY23-24F.
3Q22 revenue surpassed S$1bn for the first time since 2017
? 3Q22 revenue of S$1,022.6m (+32.8% yoy; +12.8% qoq) and net profit of S$97.4m (+26.4% yoy; +8.0% qoq) were 10.3%/9.5% above our expectations.
? 9M22 revenue formed 75.3%/78.6% of our/Bloomberg consensus full-year forecast.
? 9M22 net profit formed 75.2%/75.5% of our/Bloomberg consensus full-year expectations.
? In 3Q22, Venture exceeded S$1bn in quarterly revenue for the first time since 2017.
? Pre-tax margin was 11.6% in 3Q22 (2Q22: 12.2%, 1Q22:11.5%) and net profit margin was 9.5% in 3Q22 (2Q22: 9.9%, 1Q21: 9.4%).
? Although Venture guides that geopolitical tensions, Covid-19 lockdowns, and other headwinds persist, we think the company is well-positioned to weather a slowdown with its net cash (no debt) balance sheet and demonstrated differentiated capabilities evidenced by its pre-tax margin trend.
? We note that even when US GDP growth slowed, Venture remained profitable though it also suffered a net profit decline.
Reiterate Add with a TP of S$19.62
? Our TP of S$19.62 is based on its 21-year (FY01-22) average forward P/E of 15.2x on our FY23F EPS. No changes to our FY22-24F forecasts (although 3Q22 net profit is above our expectation, we prefer to err on the side of caution and maintain our FY22F net profit forecast given macro headwinds) and valuation basis.
? Re-rating catalysts are new product launches by customers and improvements in component availability.
? Key downside risks are a) the ongoing supply chain disruptions, which affect the availability of parts and components, b) labour shortages, and c) weakening global economic outlook.