Brokers’ take
Compiled by Navin Sregantan
VENTURE CORP | BUY (UPGRADED)
JUNE 10 CLOSE: $15.70
TARGET PRICE: $19.74
Maybank Kim Eng, June 10
We upgrade Venture Corp on a price basis with unchanged earnings estimates and target price. As at Friday, the shares have fallen 18 per cent since late April amid a broad sector sell-off. Given the earnings volatility, we favour Venture due to its more secure longer-term prospects.
These include the resumption of growth from a broad base of more than 100 customers; and its ability to sustain around a 10 per cent net margin from increased value-add with customers.
Once the earnings volatility passes, we expect a resumption of growth from wallet expansion with existing customers and contributions from new ones.
Venture has had a good track record of delivering on both.
Venture notes that the US-China trade war has been a catalyst for customer wins. These could contribute more meaningfully in the next one to two years.
We believe investors seeking improved clarity before entry should wait for Q2 results as we expect Venture to clarify the potential impact if the Huawei ban were to take effect, whether new products will proceed as scheduled, and overall outlook of its broad base of more than 100 active customers.
KEPPEL CORP | BUY (MAINTAINED)
JUNE 10 CLOSE: $6.14
FAIR VALUE: $7.33
RHB Research Institute, June 10
Property accounted for 99 per cent of Keppel Corp's earnings before interest and taxes. We like Keppel Corp for its potential for prime landbank-value unlocking in China and Vietnam.
While government policies have tightened up in recent years, we believe its China property business will still yield significant profit in the coming years, as its business is focused largely in prime areas.
In Vietnam, Keppel is developing the Saigon Sports City township in a prime area near Ho Chi Minh City.
We believe Keppel's offshore and marine (O&M) division saw its worst last year, with orderbook replenishment expected to be ramped up this year, driven by floating production storage and offloading (FPSO) conversion jobs from higher project sanctions (especially in Brazil and Mexico) expected as oil prices stabilise.
Chances of winning the conversions, in our opinion, is high given Keppel's impeccable track record in FPSO conversions. Liquefied natural gas-related projects should also support the O&M division. Sete Brasil's auction of two uncompleted Keppel semi subs is also a positive development.
Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision.
The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.
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