We believe Venture’s recent outperformance (up 16% in the last week versus the market’s expectation of up 8%) has been driven by data ratifying a strong rebound in Singapore’s electronics output in 2Q, coupled with improved optimism in tech demand.

We earlier highlighted that 1Q09 would have been the quarter with lowest profitability for Venture, with QoQ improvement for the rest of the year. Despite core profits declining 40% YoY, consensus EPS downgrades have abated, with upgrades observed in FY10E. Similarly, a marginal improvement in sales outlook for 18 of Venture’s clients provide more positive read-through from FY10E.

With Venture’s strong free cash flow-generating profile implying our dividend assumptions are intact, potential write-backs from S$157 mn in marked-to-market charges on its CDO portfolio, now at 6% of face value, raises probability of a higher dividend payout.

We will review our forecasts upon 2Q09 results, expected after market on 7 August. We roll-over our target price to S$9.25 (from S$7.90). Despite the recent climb, profitability is looking up, and Venture looks attractive on 11x P/E, at 1 std dev below its five-year mean.