Shares of Venture likely in focus after releasing disappointing earnings

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Shares of Venture are likely to be in focus on Thursday after the stock’s plunge over the past week in the lead up to its earnings release after the market close on Wednesday.

The technology services and contract manufacturer reported first-quarter net profit rose 72.2 percent on-year to S$83.7 million on revenue of S$865.0 million, up 1.5 percent on-year. It had a foreign exchange gain of S$95 million in the quarter, swinging from a S$332 million foreign-exchange loss in the year-earlier period.

“In spite of the weakened U.S. dollar and heightened uncertainty due to geo-political environment, the group managed to report a creditable set of results in the first quarter of 2018,” the company said in its outlook statement. “The group remains steadfast in execution along several key initiatives.”

The results came in below CGS-CIMB’s forecast for an 80 percent on-year increase in first-quarter net profit to S$87.5 million.

Valiantvarriors, an anonymous poster on what appears to be a free Wix site using a gmail address, on Tuesday had claimed Venture results would miss expectations by 6-8 percent, without providing an actual forecast. The post may have been a factor in some of the stock’s losses.

After the results were released, the anonymous poster said it was using S$91 million as its consensus forecast as 20 percent of 2018 full-year earnings consensus forecasts for S$455 million; it didn’t provide the source for its consensus forecast. Valiantvarriors on Thursday morning responded to Shenton Wire’s request for comment, but only referred to another of its posts.

The stock had tumbled as much as nearly 25 percent since April 19’s close at S$28.82 through its intraday lows on Wednesday, but the shares managed to retrace some losses intraday to end Wednesday down 3.55 percent on-the-day at S$22.57, off lows around S$21.68.

Analysts were pointing to tobacco giant Philip Morris’ results last week as the reason for the decline. Those results 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. Venture is believed to be a manufacturer of the device, although the company has not confirmed this.

But UOB KayHian, in a note before the results release, said that the market appeared to be pricing in a complete loss of IQOS, not slower growth.

Before the results release, KGI also weighed in on the ValiantVarriers comment, but pointed to the 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.

This post was updated to include the response from Valiantvarriors.