Previous Day Closing price: $4.03
Recommendation: HOLD (maintained)
Target price: $4.64 (reduced from $5.22)
Yield: 2007 - 14.5%, 2008F - 13.7%
We expect 4Q08 revenue to have fallen 5% yoy to $913m, bringing full year revenue to $3.79b, down 2%. If Venture decides to write off its remaining CDO exposure of $90.7m once and for all, full year net profit is forecast to be $112.5m (implying a 4Q loss of $51m). Excluding any mark-to-market, our full year forecast will be $199m implying 4Q profit of $36.7m, down 51% yoy. Its equity stake in DMX (investment cost $82.5m) could also be impaired but has not been assumed in our forecast.
Based on our pre-MTM FY08 forecast of $199m, Venture currently trades at 5.6x, below the sector average of 7.0x. However, we do not think the stock is undervalued. We note that our forecast is lower than consensus of $231m, which seems rather high given that 9M08 profit was only $162m, implying a tall order profit of $72m in 4Q08. As such, we reckon the stock is already fairly priced. Maintain Hold.
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