On 6 August 2024, Venture Corporation Limited (“Venture”) have announced their half year result for FY2024. Overall, the results were dragged down by the first quarter of FY2024, with improvements noted in the subsequent quarter as management have forecasted in the previous business update. Management have provided in their outlook that they continue to expect that Group revenue will be stronger in the second half of FY2024 compared to the first half of FY2024. Investors will need to see if this will translate to stronger results over the next few quarters.
Website: Financial Statements And Related Announcement::Half Yearly Results
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 | -12.5% | -18.9% |
Revenue decreased by a total of 12.5% to SGD1,384 million for the first half of FY2024 as compared to SGD1,582 million for the same period in the previous financial year. The decrease was due to a softer demand in the first quarter of 2024, and management have disclosed that the quarter on quarter saw an increase by 7.6%, driven largely by technology domains such as Advanced Industrial Technology, Semiconductor Related Products & Modules, Test & Measurement Instrumentation and Networking & Communications. The metric remains Unfavorable though overall it is in line with management expectations that the headwinds are beginning to taper off.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | -11.4% | No Info |
The net profit saw a decrease by 11.7% to SGD123 million for the first half of FY2024 compared to SGD140 million for the same period in the previous financial year. Accordingly, earnings per share also decreased by 11.4% to SGD0.426 per share. This is Unfavorable.
The decrease mainly arose from the decrease in gross profit, as seen that “revenue” has decreased by approximately SGD200 million while “changes in finished goods, work in progress and raw materials used” decreased by SGD150 million, registering a net decrease in gross profit of approximately SGD50 million. This was offset by lower other operating expenses.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | +5.7% | No Info |
Operating cash flows improved by 5.7%, generating SGD270 million for the first half of FY2024 as compared to SGD255 million for the same period in the previous financial year. The metrics is Favorable. However, do note that the improvement is not from profits and mainly arose from an increase in trade payables, which indicates slower repayment to suppliers
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing ratio | 21.3% | No Info |
Gearing ratio as of 30 June 2024 stands at 21.3%, with total assets of SGD3,627 million and total liabilities of SGD773 million. The metric is Favorable.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 324.1x | No Info |
The interest coverage stands at 324.1 times as of 30 June 2024, using profit before tax of SGD154 million and interest expense of SGD0.478 million. This metric is Favorable, as the extremely high interest coverage is due to the Group has no external borrowings, which is a good position to be at in view of the current high-interest rate environment.
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 1.44 | 1.39 |
Price-to-book (“P/B”) ratio stands at 1.44. This is computed using the closing share price of SGD14.16 as of 23 August 2024 and Net Asset Value (“NAV”) of the Group of SGD9.82 per share as of 30 June 2024. The metric is Unfavorable as investors will be paying a significant premium for its assets.
On another note, worth nothing that with cash and cash equivalents of SGD1,190 million with no borrowings noted. At total shares of 291 million, this represents net cash of SGD4.09 per share.
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 5.30% | SGD 0.750 |
| 2023 | 5.30% | SGD 0.750 |
| 2022 | 5.30% | SGD 0.750 |
| 2021 | 5.30% | SGD 0.750 |
| 2020 | 5.30% | SGD 0.750 |
| 2019 | 4.94% | 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.
Venture has maintained a payout of SGD0.750 per share for the calendar year 2024. With a closing share price of SGD14.16 as of 23 August 2024, this translates to a dividend yield of 5.30%. For my benchmark, a general reasonable yield would be around 5.75%. The dividend yield is Neutral as Venture is slightly below the range.
Website: Reasonable Dividend Yield 2024Q3 – 5.75%
If using dividend yield of 5.75% as a benchmark, based on the dividend of SGD0.750 there is potential for Venture to see its share price drop by another 7.9% to SGD13.04. 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 (5.30%) | 14.16 | – |
| 5.75% | 13.04 | -7.9% |
| 6.75% | 11.11 | -21.5% |
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | -12.5% | Unfavorable |
| Earnings per share | -11.4% | Unfavorable |
| Operating Cash Flows | +5.7% | Favorable |
| Gearing ratio | 21.3% | Favorable |
| Interest coverage | 324.1x | Favorable |
| Price to Book Ratio | 1.44 | Unfavorable |
| Overall | Neutral |
Overall, the metrics indicate that it remains Neutral to invest in Venture. The results are mainly dragged down in the first quarter, with improvements noted in the subsequent quarter. This is in line with management’s expectations, and they have indicated in their outlook that the Group revenue will be stronger in the second half of 2024. This should provide some credibility and assurance to investors, though we will need to see if this translates to results over the next few quarters.
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): 2024 First Quarter Business Update
