Brokers' take

Compiled by Navin Sregantan

VENTURE CORPORATION | HOLD (DOWNGRADE)

TARGET PRICE: $17.83
JULY 12 CLOSE: $16.26
CGS-CIMB, July 11

Venture is still targeting for growth in FY18. The traditionally stronger H2 seasonality effect is expected to hold this year.

At this point, Venture has not seen any changes as a result of the trade war.

The company is in constant contact with its customers to manage the situation.

Looking at its FY2013-2017 performance, on average, the second quarter accounted for 24.7 per cent of sales and 22.7 per cent of net profit.

Taking history as a guide, Q2 net profit could come in at $87.6 million (25 per cent year on year and 5 per cent quarter on quarter). H2 net profit, however, could fall 15.7 per cent year on year given the high profit base in H2 2017.

Despite the threat from higher costs due to the tariff impact as well as the ongoing component shortage, we leave our margin assumptions intact as we assume that Venture will continue to manage costs well (as evident in Q1 results).

Also, given the ongoing valuation derating and the possibility of average 8 per cent earnings growth over our FY2018-2020 forecast period, we derate the stock's P/E multiple to 12.3x.

A upside key risk to our call is the resolution of US-China trade tensions, which could see Venture revert to a higher revenue growth rate over our forecast period.

Downside risks could come from product launch delays by customers.

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THAI BEVERAGE (THAIBEV) | BUY (MAINTAINED)

TARGET PRICE: $1.02
JULY 12 CLOSE: $0.73
RHB Research, July 12

We remain positive on ThaiBev's medium-term prospects despite near-term softening of demand. With consumer confidence at a 40-month high, we expect premiumisation in alcohol consumption to be realised in two to three years.

This is in conjunction with efforts to introduce higher-value products such as Ruang Khao Silver, Blend 285 Signature and Federbrau.

New products such as Kulov Max Seven and Star Cooler are also expected to bring higher margins and reach out to a wider consumer base.

We trim our earnings by 3 per cent to 4 per cent, which yields a new target price because of the lower-than-expected beer sales in May.

However, we are positive on medium-term prospects on strong economic growth and potential margin expansion from new products.

Near-term, higher rural income driven by campaigns for the upcoming elections would be a positive catalyst for alcohol consumption.

Key risks include slower-than-expected recovery in consumption and intensifying competition.

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