Venture shares extend tumble on customer concerns as anonymous post emerges

Singapore durian vendorSingapore durian fruit

Venture shares extended their tumble ahead of its earnings on Wednesday, continuing to be hurt by concerns about its customers and potentially also an anonymous website with negative comments about the company.

The stock had tumbled 7.31 percent to S$21.69, for a nearly 25 percent plunge since Thursday’s close.

In a statement to SGX in response to a query on the price movement, Venture said on Friday that it wasn’t aware of a reason for the decline.

But analysts were pointing to tobacco giant Philip Morris’ results last week, which showed that its device, IQOS, which heats but doesn’t burn tobacco, added only 3 percentage points to cigarette volumes, halving the growth rate of the previous quarter, Marketwatch reported last week. Those results had sent Philip Morris shares down as much as 17 percent on the day.

The anonymous ValiantVarriers website, which appears to be a free Wix site only recently created and which uses a gmail address, created a negative post about Venture on Tuesday.

It said that the Philip Morris news was a “smoking gun,” and analyst estimates that IQOS was only between 5-10 percent of sales were erroneous. The entirely anonymous ValiantVarriers claimed that its “extensive,” but unprovided, research showed IQOS was 30 percent of Venture’s revenue. It forecast that Venture would miss earnings estimates for the first quarter by 6-8 percent, but provided no details of its sources.

The post said “some of us” hold a position in Venture.

ValiantVarriers didn’t immediately respond to Shenton Wire’s email requesting comment and details of their claims. Venture didn’t immediately respond to Shenton Wire’s email requesting comment, but the company is likely in its quiet period before its earnings release due later Wednesday.

It’s unclear whether the anonymous post on the free website was in fact driving the share price at all on Wednesday.

While the site may appear to superficially echo anonymous researcher Iceberg Research’s long-running commentary on Noble, ValiantVarriers provided few, if any, details or sources for its claims. Iceberg Research didn’t immediately respond to an email seeking comment.

Buying opportunity?

KGI Securities highlighted ValiantVarriers in a trading note, but then pointed to Venture’s selloff as a potential buying opportunity.

It noted that on the charts, the stock has broken both the 50-day and 100-day moving averages, with the next support at the 200-day moving average of S$20.69. KGI added that Venture is now trading around 12-15 times 2018-2020 earnings per share forecasts.

“We understand that Venture is hitting capacity constraints – i.e. markets may be overly discounting the impact of Philip Morris to its 2018 earnings growth – and that an earnings miss for its first quarter results may actually be an opportunity to enter,” KGI said.

That echoed UOB KayHian, which said in a note on Monday that Venture’s share price tumble appeared to be pricing in the complete loss of IQOS, not slower growth.

“In the worst case, we only expect the average selling price for IQOS to face a sharper than 5 percent year-on-year decline, but this could be offset by revenues from design services, which Venture continues to do so wholly for Philip Morris,” UOB KayHian said, adding “While IQOS makes up a significant chunk of revenue, it is important to note that growth is driven by a host of other products.”

Indeed, CGS-CIMB said in a note on Friday that it estimated Philip Morris could have accounted for 7.0 percent or more of Venture’s fiscal 2017 turnover. It noted that the first quarter historically accounted for 20 percent of full-year performance, with an on-quarter decline typical. It forecast a 34 percent on-quarter decline and an 80 percent on-year increase in first-quarter net profit to S$87.5 million.