Maybank KE downgrades Venture despite earnings beating forecast

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Maybank KimEng downgraded Venture to Hold from Buy in a note on Friday, pointing to the cautious outlook the company provided with its earnings.

“VMS management has warned of near-term ‘performance volatility,’ which may be a negative share price catalyst,” the note said.

Contract manufacturer Venture Corp. reported Thursday its first quarter net profit rose 8.6 percent on-year to S$90.9 million on broad-based growth in its technology portfolio and “solid execution of customers’ programs.”

Maybank KimEng said the results were slightly ahead of its forecast at 24 percent of its full-year estimate, compared with the first quarter typically coming in at 20-23 percent.

But it added that Venture has indicated that the traditional 45:55 revenue seasonality pattern for the first half versus the second half of the year may be “less pronounced” this year.

“This is due to a mixed outlook from its broad base of greater than 100 customers as a result of protracted trade tensions and the global economic slowdown,” Maybank KimEng said. “We recommend investors await a more attractive entry point, and/or when it is becomes apparent earnings volatility has passed.”

The brokerage raised its 2019-2021 earnings per share forecasts by 2-3 percent to reflect the first-quarter results, boosting the target price to S$19.74 from S$19.23.

Venture shares were down 8.66 percent at S$17.62 at 11:07 A.M. SGT.


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