What’s the latest on Venture’s share price as board delays dividend payments?

The technology group’s share price has been gaining since the Singapore government announced its third fiscal stimulus on 06 April.

Venture Corporation’s share price on the rebound

Share price of Singapore technology product and services conglomerate Venture Corporation is starting to rise again, following an extended price rout that lasted over a month.

Between 05 March and 23 March 2020, the company’s share price had fallen as much as 26%, driven by a wave of panic selling in global markets as a result of the worsening coronavirus pandemic.

A series of small rises and falls followed in the two weeks after, before a firm upward slope was established starting 03 April, as market volatility began to subside with the coronavirus situation improving slightly in Europe as well as the US.

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A third economic stimulus unveiled by the Singapore government on 06 April – taking the total amount of coronavirus-financial aid to US$59.9 billion since the start of the Covid-19 outbreak – also boosted the ongoing Venture stock value recovery by 17% to the current one-month high share price of S$15.59 per share.

It should also be noted that the group’s Board of Directors had also announced on 08 April that it had obtained approval from authorities to postpone its annual general meeting to as late as 29 June. As a result, the previously announced final 2019 dividend payout date of 22 May 2020 will now be revised, with a new date to be revealed in due course.

Venture Corp’s share price hit a nine-month high in early-March

In our last update on the company, things were looking somewhat different. Venture’s share price had managed to hit a nine-month high share price of S$17.14 a share, even amid the coronavirus-driven panic selling of early-March 2020 that had affected most Singapore equities, including blue-chip stocks.

Venture – a 12,000-person strong company with more than 30 subsidiaries and affiliates spread across Southeast Asia, Northeast Asia, America and Europe – was one of few companies that managed to fend off the downward price momentum for a brief period of time, thanks in most part to the release of its largely healthy 2019 earnings.

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Analysts lower their Venture share price targets by 14.6%

With the upward momentum still in an arguably nascent stage, analysts have lowered their 12-month price targets on the stock.

DBS researchers reduced their Venture Corporation share price target by 14.6% to S$15.80 from S$18.50 per share previously, while maintaining a ‘buy’ rating, pegged to a 12.5x 10-year average price-to-earnings ratio for the full 2020 financial year.

In lieu of the global health crisis, the brokers have cut their earnings forecast for Venture’s FY20F/FY21F by 5%/3% to account for the temporary shutdown of most of its Malaysia factories and to a lesser extent, its China plants. The analysts also lowered net margin estimates to 9.9% for FY20F in view of global supply chain disruptions, with a possible gradual improvement to 10.2% in FY21F.

According to DBS, other risk factors include potential exposure to customers in the US, European Union and Asia, with a broad global slowdown likely to impact Venture due to its vulnerability to business cycles. A possible weakness in the Eurozone arising from political instability or restrictive trading policies by the US could also weaken global growth prospects, the analysts added.

A weakening US dollar against the Singapore dollar and a prolonged accommodative monetary policy could also lower Venture’s earnings. DBS’s sensitivity analysis shows that every 1% appreciation of USD against SGD will increase Venture’s net profit by approximately 1.9%.

However, the analysts’ forecast for Venture’s second half of 2020 remain largely optimistic, stating that they expect the group to ‘emerge strong’ from the coronavirus crisis, ‘supported by new product introductions and new partners coming on stream’, its entrenched relationships with industry leaders in the various technology domains, and its strong balance sheet.

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