Is Venture worth buying at S$20.40 a share?
Venture Corporation’s share price is up some 9% since the group raised dividends by 25% for the first half of 2020 last Friday.
Venture share price: What’s the latest?
Shares of Singapore technology group Venture Corporation (SGX: V03) remain lifted on Friday 14 August 2020, a week after the company proposed higher interim dividends for the first half of fiscal 2020.
As at 10:45 SGT on Friday, Venture shares are trading at S$20.47 each on the IG platform – roughly 9% higher than a week ago.
Despite the bullish trends, IG’s market analysis shows that ‘sells’ currently form 75% of all trades on the Venture counter, and 51% of all trades across the week so far.
Additionally, 67% of client accounts also hold ‘sell’ (short) positions with on the stock, indicating a greater expectation for Venture’s share price to fall in the near term.
Venture raised H1 dividends by 25%
Last Friday 07 August, the company announced its first half (H1) earnings for the 2020 financial year, in which it reported a net profit of S$130.5 million for the six months ended 30 June 2020.
This works out to be 28.1% lower than H1 2019’s net profit of S$181.7 million. On a quarterly basis, however, net profit for Q2 2020 grew 16.4% from Q1 2020.
The group also generated a revenue of S$1.4 billion for the June half, representing a decline of 25.5% from the same period a year ago.
Venture attributed the lower revenue to global supply chain disruptions and factory lockdowns in Malaysia, Spain, US and China caused by Covid-19 measures across the world.
As a result, diluted earnings per share came in at S$0.449 for H1 2020, down 28.6% from H1 2019’s S$0.629.
Despite the lower earnings, the group’s board of directors still proposed an interim shareholder dividend per share (DPS) of S$0.25 per share on a one-tier tax-exempt basis – 25% higher than the S$0.20 paid out in H1 2019. Dividends are expected to be paid on 18 September 2020.
Venture expects recovery to continue into second half
Overall, Venture credited its sequential recovery in the second quarter of 2020 to the effective teamwork, resourcefulness and resiliency of its people.
‘Through this combined effort, Venture overcame the challenges precipitated by Covid-19 pandemic to deliver on its commitments to its customers and partners,’ it stated in the H1 earnings release.
With the gradual reopening of some economies since late April 2020, the group stated that it is also working to fulfil customer orders from other technology domains serving non-essential end markets.
Looking ahead, the group says that the steady recovery seen in Q2 2020 is expected to continue into the second half of this year. In light of that, Venture also revealed that its research and development labs have plans to release a number of newly developed products into manufacturing commencing early 2021.
Analysts say 4% dividend yield ‘highly sustainable’
As of 11 August 2020, the stock has a 12-month consensus share price target of S$19.18 per share from five analysts, alongside an average rating of ‘hold’ – based on a Refinitiv poll of 13 brokers.
RHB brokers maintained a ‘neutral’ rating on Venture, but raised their target price to S$19 a share from S$15.10 previously.
They cited several reasons for the share price target increase, including higher profit after tax and minority interest predicated on the firm’s optimism regarding a continued recovery, as well as higher year-end dividends for fiscal 2020.
‘Assuming the final dividend remains unchanged, FY20F DPS will likely increase to S$0.75 from S$0.70, representing a 4% FY20F yield. We think this highly sustainable, and shareholders will likely continue to enjoy higher dividends if its performance continues to improve,’ the analysts wrote in an 11 August 2020 note.
On the flipside, they noted that key risks to the stock’s performance include decelerating economic growth, and a worsening of the US-China trade war.
Meanwhile, UOB also raised price target to S$17.64 from S$14.46 previously, reiterating a ‘hold’ rating, pegged to Venture’s long-term forward mean price-to-earnings ratio of 14.4x on FY2021’s expected full-year earnings.
They concluded that the stock is worth buying at an entry price of S$16 per share.
How to trade Venture Corp with IG
Are you feeling bullish or bearish on Venture shares? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:
- Create a live or demo IG Trading Account, or log in to your existing account
- Enter <Venture Corp Ltd> in the search bar and select the instrument
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
Read more: Why did Venture shares rise 8% in four days?
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