3Q22: Results Slightly Above Expectations; Outlook Remains Promising
VMS’ 3Q22 earnings of S$97.4m (+26% yoy) exceeded our expectation by around 10%. All of its seven domains recorded growth due to strong customer demand, as evidenced by 3Q22 being the first quarter since 2017 to record revenue in excess of S$1b. VMS remains confident in its outlook given its unique ability to overcome supply chain issues for its customers, thanks to its differentiated capabilities. We raise our 2022 EPS and target price by 4% to S$20.06. Maintain BUY.
• Results above expectations due to continued growth across all seven technology domains. Venture Corporation’s (VMS) 3Q22 earnings of S$97.4m (+26% yoy) exceeded our expectation by around 10%. 9M22 earnings of S$271m (+25% yoy) accounted for 78% of our full-year estimate. For the first time since 2017, quarterly revenue has exceeded S$1b, signifying an increase in demand for its product offerings. Solid growth across all the domains and its resilience against market volatilities such as geopolitical tensions have led to its robust performance. Net margin remained stable at 9.5%, which is an indication of VMS’ core competencies and pricing power.
• Outlook for demand remains promising. VMS expects to continue producing resilient results in the coming quarter. Based on its customers’ orders and forecasts, it expects demand to remain healthy. VMS sees resilient demand across its diversified customer base, especially in the life science & genomics, healthcare & wellness, networking & communications, test & measurement instrumentation and process & test equipment in the semiconductor technology domains.
• Enhancement and creation of differentiating capabilities help VMS to stand out. VMS persistently initiates ways to stay afloat amid macroeconomic headwinds, including: a) redesigning its products to reduce dependency on parts that are experiencing shortages, b) working with customers to obtain a longer order forecast for better procurement and production planning, and c) increasing stockpiles of inventories and sharing the working capital burden with customers. These, along with its R&D capabilities, allow VMS to continue attracting strong customer demand to maintain its market position.