On 3 May 2024, Venture Corporation Limited (“Venture”) have announced their business update for the first quarter of 2024. There are no significant updates this quarter, with disclosures mainly on the decrease of revenue and net profit when compared to the same period in the previous financial year. Management however have indicated that the headwinds are starting to taper off, which may be an indicator that the financial performance will improve over the next few quarters. This is something investors can look forward to if it holds true.
Website: General Announcement::Business Update For 1Q 2024
Background
Venture was formed in 1989 as an electronic services provider after the merger of three companies. Today, Venture is a leading global provider of technology services, products and solutions with established capabilities spanning marketing research, design and development, product and process engineering, design for manufacturability, supply chain management, as well as product refurbishment and technical support across a widely diversified range of high-mix, high-value, and complex products.
Venture has built know-how and intellectual property with expertise in several technology domains. These include life science, genomics, molecular diagnostics, medical devices and equipment, healthcare and wellness technology, lifestyle consumer technology, health improvement products, instrumentation, test and measurement technology, networking, and communications, fintech, as well as computing, printing and imaging technology. The Group manages a portfolio of more than 5,000 products and solutions and continues to expand into new technology domains through its collaborations with customers and partners in selected ecosystems of interests.
In its pursuit to create unparalleled enterprise excellence across design and engineering, manufacturing and distribution, Venture has forged numerous meaningful partnerships and alliances. As it assumes a key role in the enterprise chain, Venture will continue to tap the knowledge and best-in-class capabilities of global enterprises for breakthrough innovations.
Headquartered in Singapore, the Group comprises more than 30 companies with global clusters in Southeast Asia, Northeast Asia, America and Europe and employs over 12,000 people worldwide.
VIPColor Technologies Pte Ltd (www.vipcolor.com) and Advanced Products Corporation Pte Ltd (www.apc-vest.com) are wholly owned subsidiaries of the Venture Group. They provide industry leading solutions for on-demand color label printing and embedded systems respectively.
Financial highlights
Revenue
| Metrics | Current | Previous |
|---|---|---|
| Revenue | -18.9% | -21.7% |
Revenue decreased by a total of 18.9% to SGD666 million for the first quarter of 2024 as compared to SGD821 million for the same period in the previous financial year. This is an Unfavorable and is on a continued downtrend from the previous years, due to lower overall customer demand amid some remaining headwinds. Management however have mentioned that these are beginning to taper off. This is an Unfavorable aspect of a dividend stock.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | No Info | -26.9% |
Based on the announcement on 3 May 2024, earnings per share was not included in the business update for the first quarter of 2024.
Management have disclosed that net profit the first quarter is SGD60 million. This is a decrease by 18.3% when compared to the first quarter of 2023. It is in line with their net margins from the previous quarters, which indicates nothing unusual and mainly due to a slowdown in business operations. However, together with 2023 seeing a decrease in net profit by 26.9% for the full year, this is Unfavorable.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | No Info | +93.8% |
Based on the announcement on 3 May 2024, operating cashflows was not included in the business update for the first quarter of 2024.
The metrics was Favorable in the previous quarter as cashflow generated from operations increased by 93.8%.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing ratio | No Info | 20.2% |
With effect from April 2024, my articles will be shifting the metric for this section from debt-to-equity ratio to gearing ratio. This will allow readers to have an easier comparison with Real Estate Investment Trusts (“REITs”) and determine the amount of financing each Company is using. Gearing ratio was 20.2% for the previous quarter, with total assets of SGD3,554 million and total liabilities of SGD717 million.
Based on the announcement on 3 May 2024, no detailed breakdown of the financial position to determine the gearing ratio was provided in the business update for the first quarter of 2024.
The metrics was Favorable as it stood at 20.2% as of 31 December 2023.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | No Info | 457.9x |
Based on the announcement on 3 May 2024, no detailed breakdown of the financial results to determine the interest coverage was provided in the business update for the first quarter of 2024.
The metric was Favorable as of 31 December 2023 where there was an extremely high interest coverage of 457 times due to the Group had no external borrowings. This is unlikely to change significantly as of 31 March 2024.
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 1.39 | 1.44 |
Price-to-book (“P/B”) ratio stands at 1.39. This is computed using Net Asset Value (“NAV”) of the Group as of 31 March 2024 of SGD10.06 per share and the closing share price of SGD14.00 as of 10 May 2024. The metrics is Unfavorable as investors will be paying a significant premium for its assets.
Dividend yield
| Year | Yield | Total |
|---|---|---|
| 2024 | 3.57% | SGD 0.500 |
| 2023 | 5.36% | SGD 0.750 |
| 2022 | 5.36% | SGD 0.750 |
| 2021 | 5.36% | SGD 0.750 |
| 2020 | 5.36% | SGD 0.750 |
| 2019 | 5.00% | SGD 0.700 |
Although the Group does not have a formal dividend policy, it strives to pay dividends that are on par or higher than the previous year. Since FY2018, the Group has paid interim and final dividends. Barring unforeseen circumstances, the Group aims to declare dividends at sustainable rates.
With the payout of SGD0.500 per share in the first half of 2024, Venture is likely to maintain the payout of SGD0.750 per share for the calendar year 2024. As of 10 May 2024, with a closing share price of SGD14.00 this translates to a dividend yield of 5.36%. For my benchmark, a general reasonable range would be around an average of 5.50% to 6.50%, and Venture is slightly below the range. The dividend yield is Neutral.
Website: Reasonable Dividend Yield 2024Q2
If using dividend yield of 5.50% as a benchmark, based on the dividend of SGD0.750 there is potential for Venture to see its share price drop by another 2.6% to SGD13.64. While the decrease is not significant if the required yield is 5.50%, investors will need to be mentally prepared that the share price may fall further should the interest rates and yield of safe assets increase.
| Yield | Share Price | Downside |
|---|---|---|
| Current (5.36%) | 14.00 | – |
| 5.50% | 13.64 | -2.6% |
| 6.50% | 11.54 | -17.6% |
| 7.50% | 10.00 | -28.6% |
| 8.50% | 8.82 | -37.0% |
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | -18.9% | Unfavorable |
| Earnings per share | No Info | Unfavorable |
| Operating Cash Flows | No Info | Favorable |
| Gearing ratio | No Info | Favorable |
| Interest coverage | No Info | Favorable |
| Price to Book Ratio | 1.39 | Unfavorable |
| Overall | | Neutral |
Overall the metrics indicate that it remains neutral to invest in Venture. Management have indicated that the headwinds are beginning to taper off. Investors will therefore need to assess their risk appetite and see if the results for the next few quarters are in line with expectations.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
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Website: Venture Corporation Limited (SGX: V03): 2023 Full Year Result
