Credit Suisse downgraded Venture to Neutral from Outperform and cut its estimates after first-quarter earnings missed forecasts, pointing to a lack of near-term catalysts.
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.
Credit Suisse said the net profit figure was only 18.4 percent of consensus full-year forecast, while revenue grew much less than expected, partially due to a weaker U.S. dollar. But the bank noted that while the company said revenue would have grown 9.1 percent on-year in U.S. dollar terms, that was still below the Credit Suisse forecast for 15 percent.
The bank cut its revenue growth forecasts for 2018-20 to 5-8 percent from 9-14 percent and lowered its earnings estimates by 7-13 percent; it cut its target price to S$24 from S$32.
Despite the stock’s sharp recent correction, “we believe that risk-reward is fair as the exposure to next-generation products is offset by limited visibility on other segments,” it said.
The stock was down 8.86 percent at S$20.57 at 10:25 A.M. SGT on Thursday, totting up a nearly 29 percent cumulative drop since the April 19 close at S$28.82 after the Philip Morris results.
The stock has plunged recently, and 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.
But Credit Suisse said it believed the reduced guidance from Philip Morris would have an only 1-2 percent impact on Venture’s revenue.
“What is more significant is the disappointment in the main T&M/Medical segment where there is limited visibility of near-term growth acceleration,” it said.