DBS Group Research is keeping its “buy” call on Venture Corporation with a higher target price of $16.60, raised by some 16% from $14.30 previously.
“The company has demonstrated consistent revenue growth on a year-on-year basis for the last 15 quarters,” says DBS lead analyst Suvro Sarkar in a Monday report.
In the 2Q ended June, the electronics services provider posted a 61% surge in earnings to $69.8 million, on the back of a 48.3% growth in revenue to $1 billion.
“With earnings growth trajectory gaining momentum over the last five quarters due to its exposure in attractive end-markets such as genome sequencing, we believe that there is a possible upside to dividends,” Sarkar adds.
On the back of this strong growth momentum, the Singapore Stock Market analyst believes that there is potential for Venture to raise its dividends by as much as 10% to 55 cents per share in FY17F, from the 50 cents per share it has been paying since FY2012. This would translate to an FY17F dividend yield of about 3.6% at current Stock prices.
Sarkar is also revising Venture’s earnings forecast for FY17F and FY18F upwards by 15% and 11%, respectively.
“We remain positive on Venture’s growth trajectory and believe the market has yet to fully price in the company's growth potential given its unique offerings, superior technology know-how, and hard-to-replicate ecosystems,” Sarkar says.
Sarkar says the research house is rolling forward its valuation base to FY18F, pegged to Venture’s five-year historical mean PE valuation of 18.2x. This is lower than the average of forwarding PE of approximately 19x for its high-mix low-volume Electronic Manufacturing Services (EMS) peers.
As at 1.14pm, shares in Venture Corp are trading 7 cents higher at $15.13.
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