Venture Corp on track for strong recovery

OCBC outlook upbeat for second half.

While Venture Corp posted an "encouraging" performance during the second quarter of 2013 with most business segments growing revenues by double-digit.

The recovery momentum should extend until the end of 2013, during which Venture Corp is expected to deliver higher earnings on the back of new product launches, notes research firm OCBC.

Here's more from OCBC:

2Q13 results within expectations; QoQ pickup encouraging. Venture Corp (VMS) reported 2Q13 results which were within our expectations. Revenue fell 3.9% YoY to S$587.7m. PATMI dipped 10.6% YoY to S$30.1m largely due to higher income tax expense, a S$3.2m gain on disposal of available-for-sale investments in 2Q12, but partially offset by a net forex adjustment gain of S$2.1m. Sequentially, revenue and PATMI rose 10.8% and 7.3%, respectively. All but one of its business segments grew double-digit for revenue on a QoQ basis, which we view as an encouraging sign. For 1H13, revenue slipped 5.7% to S$1,118.2m, forming 48.6% of our FY13 forecast. PATMI declined 16.0% to S$58.1m, or 43.1% of our full-year projection, but we expect a stronger showing from VMS in 2H13.

More positive outlook. Management sounded more upbeat during the analyst briefing, highlighting better sentiment amongst most of its customers. We also expect more meaningful contribution in 2H13 from the mass production of programmes from customers acquired in 2012 as well as new product launches. From a longer-term perspective, VMS is also targeting stronger penetration in the 3Dprinting industry. It is currently working with a leading player within this space (dealing with Fused Deposition Modelling and PolyJet technology), although this is still at a nascent
stage of development.

Upgrade to BUY. We retain our projections and roll forward our valuations to 15x blended FY13/14F EPS, which correspondingly raises our fair value estimate from S$7.37 to S$7.94. Given VMS’s recent weak share price performance (-10.9% YTD), our forecasted FY13F DPS of S$0.50/share now translates into an attractive yield of 7.0%. Coupled with an improved outlook, we believe that investors should position for VMS’s operational recovery in 2H13 and FY14. Hence we upgrade the stock from Hold to BUY, with potential total returns of ~17.5%.