Excerpts from CGSCIMB report

Venture Corporation (SGX: V03)

• Venture Corporation reports FY23F results on 22 Feb 2024. We think FY23F net profit could fall 27.9% yoy as customers’ orders could remain weak.
• The overall revenue outlook may continue to remain weak over FY24-25F.
• Hence, we reduce our FY24-25F revenue forecasts by 1.5-2.0%.

We reiterate our Add call with a lower TP of S$15.90 as our FY25F 2.0% cut in revenue forecast leads to a 4.3% decrease in EPS forecast.

Read through from Plexus (PLXS US, NR, CP: US$99.50)

On 16 Jan 2024, Plexus announced that it would not meet its 1QFY9/24F revenue guidance of US$990m to US$1.03bn (issued in Oct 2023) as the company experienced continued market-driven inventory corrections and incrementally weaker demand. Plexus now expects 1Q24F revenue of US$980m-985m (1.0-4.4%) lower than previously guided. In its 9M23 business update press release, Venture said its performance was affected by softened demand and inventory adjustments from its customers. We think the read through from Plexus is that 4Q23F demand environment could similarly remain weak for Venture.

Key customers’ revenue growth outlook has slowed

We note that Bloomberg consensus revenue growth expectations for Venture’s customers have slowed from 1.24%/5.20%/7.81% for FY23F/FY24F/FY25F as at 6 Oct 2023 to – negative 0.72%/2.58%/6.85% as at 17 Jan 2024. Similarly, for Venture’s Lifesciences customers, Bloomberg consensus FY23-25F revenue growth expectations (as at 6 Oct 2023) of 0.16%/5.71%/7.83% have now slowed to -2.95%/0.51%/7.33% as at 17 Jan 2024.

Lowering FY23-25F forecasts

Given the read through from Plexus and the slower revenue growth expectations by Bloomberg consensus as at 17 Jan 2024, we reduce our FY23-25F revenue forecasts by 0.5-2.0% to be conservative. Hence, we cut our FY23-25F EPS forecasts by 1.3-7.2%. We expect FY23F net profit to fall 27.9% yoy to S$266.6m while 4Q23F net profit could be S$66.3m (flat qoq, -35.4% yoy). Our DPS forecasts of S$0.75 over FY23-25F are intact. Reiterate Add, TP lowered to S$15.90 due to EPS forecast cut

Valuation/Recommendation

We reiterate our Add call on Venture given its 5.46% dividend yield (over FY23-25F) and potential for EPS growth resumption in FY24-25F. We retain our valuation basis of 14.6x FY25F P/E (15-year average). Given the FY25F EPS forecast reduction, we lower our TP to S$15.90 (S$16.61 previously). Venture Corporation share price chart You can find the full report here and the company website here.