‘Smoke has cleared’ over Venture earnings, RHB says, sticking with Buy

A Singapore 10-dollar note Photo by Leslie Shaffer

Venture managed to report a “decent set of results” despite a hit from a weaker U.S. dollar, and margins are set to expand ahead, RHB said in a note on Thursday.

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. In the release after the market close on Wednesday, the company pointed to a weaker U.S. dollar and heightened geo-political uncertainty, noting that in U.S. dollar terms, revenue would have grown by 9.1 percent.

Venture’s shares have tumbled amid concerns over Philip Morris’s IQOS device after the tobacco giant’s results showed the product, which heats but doesn’t burn tobacco, had seen slower demand growth after sales surged last year.

The stock closed down 1.55 percent at S$22.22 on Thursday, retracing its intraday drop to as low as S$19.84, the lowest since November. That low point marked a more than 30 percent drop from the April 19 close at S$28.82.

“With Venture, one of the few in the Singapore tech sector reporting a positive first quarter of 2018, we consider the selling over the past few days to be overdone, partially encouraged by a negative short sell report, it said. “We believe, however, that the smoke has been cleared and maintain our Buy call.”

However, RHB cut its 2018 earnings forecast by 5 percent, pointing to caution over the electronics and semiconductor industry slowdown, and lowered its target price to S$26, based on 17.2 times price-to-earnings from 19 times previously.

According to SGX data, 942,000 Venture shares were sold short on Thursday, up from 522,200 on Wednesday.