Venture

Venture: 3Q14 performance in line. Net profit increased 3.2% y/y to $36.1m, bringing 9M14 net profit to $100.5m (+7.9%). Revenue of $598.7m (+1.7%) was driven primarily by a 25.9% growth in Test &measurement/ medical/ others segment, offset by a 35.1% decline in computer peripherals & data storage segment, and a 10% decline in printing & imaging segment. PBT rose 15.2% to $40.9m, aided by a 0.8ppt increase in PBT margin to 6.8% on improved business mix and efficiency. Nevertheless, bottom line growth was dampened by nine-fold increase in tax, as tax incentives to subsidiaries has changed (pioneer status in Malaysia is now tagged to approved activities, rather than investments) Management is sanguine of Agilent’s split into two businesses, i.e. Keysight (test and measurement) and Agilent (life sciences), as this could spur growth that Venture could leverage on. Meanwhile, a Republican Congress could see tax savings for medical device makers next year. Retail Store Solutions (+1.5% y/y) could also see a boost next year as retailers upgrade. Overall, prospects are positive. Many customers which were undergoing M&A have completed their post-merger integration. Resultantly, there should be less volatility arising from customer consolidations. While wage pressure persists, management has in place productivity programs to counter this. Maybank-KE is eyeing FY15 to be a turnaround year, with 15% growth and FY15e yield of 7%. Latest broker ratings: Maybank-KE maintains buy with TP of $8.88 UBS maintains Buy with TP decreased to $8.65, from $8.80 UOB KayHian upgrades to Buy with TP increased to $8.25, from $8.15