Venture Corp slowly veering to profitability: DBS
The tech firm got hammered by the Thai floods but its new product slate will fish it out of the earnings muck.
Its recovery will be propelled by strong sales of new Printing & Imaging models as well as the upcoming release of Industrial and Test measuement products, said DBS Vickers Securities in its Singapore small mid cap explorer report.
Here's more from DBSV:
Venture (Buy, TP: S$9.60) is our mid cap pick for the tech turnaround. Capitalizing on recent trends, we would look within the tech sector, expected to report a turnaround in earnings this year after weak earnings performance last year due to floods in Thailand. Notwithstanding a difficult 4Q11 for the sector, Venture proved surprisingly resilient with a stand out set of better than expected 4Q11 results. Outlook, while still guarded, was certainly positive.
We expect Venture’s recovery in FY12 to start off slowly but improve steadily. Besides capturing the full year benefit of new Printing & Imaging models launched towards the end of 2011, several new Industrial and Test & measurement products are also slated to be released in 2H12. By and large, Venture sees better traction with key customers. We believe this should translate into increased market share. At the moment, we estimate net profit to grow 12% in FY12 and 10% in FY13. We see potential upside to our forecast from better than expected run-rates and margins.
FY12 recovery may start slow but outlook is notably positive. Notwithstanding prevailing macro uncertainty, Venture sees pocket of opportunities and strength in 2012 as the company anticipates better traction with key customers. For the Printing & Imaging segment, Venture has just introduced new models towards end of 2011 so the company would enjoy a full year benefit when the ramp up kicks in. The Retail store solutions/Industrial and Test & measurement segments should also continue their positive momentum, driven by new products slated for launch in 2H12.
Overall growth lifted by scale and improved margin. Post 4Q11 results, we raised FY12 and FY13F sales by 9% each given positive growth outlook in the P&I, TMI and RSSI segments. As improved scale would lead to positive operating leverage, we have also notched up margin assumption by 20-30bps. Overall, we raised our FY12-13 earnings estimates by 12-14%. We see further earnings upside to stem from higher than expected run-rate and margin.