On 8 November 2024, Venture Corporation Limited (“Venture”) have announced their third quarter business update for FY2024. The major update this quarter is that revenue has decreased when comparing quarter on quarter. Accordingly, management have revised their outlook, with expectations that Group revenue for second half of 2024 to be relatively stable compared to first half of 2024. This is a notable shift from their earlier expectations that Group revenue will be stronger in the second half of 2024.
Investors will need to take note on the financial performance of the company this coming full year update and determine if Venture is able to generate more revenue as they are onboarding new customers in selected technology domains.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
Website: General Announcement::Business Update for 3Q and 9M 2024
Financial Highlights
Revenue
| Metrics | Current | Previous |
|---|---|---|
| Revenue | -3.9% | -12.5% |
| Rating | Unfavorable | Unfavorable |
Management disclosed that revenue decreased by 3.9% when comparing quarter on quarter to SGD690 million. This was largely due to soft demand in the Life Science, Lifestyle Consumer and Test & Measurement Instrumentation tech domains. Partly offset by higher revenue in the Networking & Communications and Semiconductor Related Equipment tech domains as their growth initiatives delivered improved performance. The metric remains Unfavorable, and noted it is not in line with management expectations that the headwinds are beginning to taper off.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | No Update | -11.4% |
| Rating | Unfavorable | Unfavorable |
Based on the announcement on 8 November 2024, earnings per share was not included in the business update for the third quarter of FY2024.
Management have disclosed that net profit has decreased by 4.7% quarter on quarter, in line with lower revenue given that net margin remains relatively unchanged. This metric remains Unfavorable.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | -8.9% | +5.7% |
| Rating | Unfavorable | Favorable |
The breakdown of operating cash flows generated are as below:
- 9 months ending 30 September 2024: SGD393 million
- Third Quarter of FY2024: SGD123 million
- First Half of FY2024: SGD270 million
This represents that this quarter saw cash flow generated from operations decreased by 8.9% when compared to the average of SGD135 million per quarter for the first half of FY2024. The metrics is Unfavorable. Do note that management did not provide a detailed breakdown of the cash flow for further analysis.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing ratio | No Update | 21.3% |
| Rating | Favorable | Favorable |
Based on the announcement on 8 November 2024, no detailed breakdown of the financial position to determine the gearing ratio was provided in the business update for the third quarter of FY2024.
The metric was Favorable as of 30 June 2024 with the gearing ratio standing at 21.3%, using total assets of SGD3,627 million and total liabilities of SGD773 million.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | No Update | 324.1x |
| Rating | Favorable | Favorable |
Based on the announcement on 8 November 2024, no detailed breakdown of the financial results to determine the interest coverage was provided in the business update for the third quarter of FY2024.
This metric was Favorable as of 30 June 2024 given the interest coverage at 324.1 times, using profit before tax of SGD154 million and interest expense of SGD0.478 million.
Price-to-book ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 1.32 | 1.44 |
| Rating | Unfavorable | Unfavorable |
Based on the announcement on 8 November 2024, net asset value (“NAV”) was not included in the business update for the third quarter of FY2024.
Price-to-book (“P/B”) ratio stands at 1.32. This is computed using the closing share price of SGD12.98 as of 2 December 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.
As of 2 December 2024, the Market Capitalization is approximately SGD3,766 million.
Website: Yahoo Finance: Venture Corporation Limited (V03.SI)
Dividend
| Year | Yield | Total |
|---|---|---|
| 2024 | 5.78% | SGD 0.750 |
| 2023 | 5.78% | SGD 0.750 |
| 2022 | 5.78% | SGD 0.750 |
| 2021 | 5.78% | SGD 0.750 |
| 2020 | 5.78% | SGD 0.750 |
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 a payout of SGD0.750 per share for the calendar year 2024 and closing share price of SGD12.98 as of 2 December 2024, this translates to a dividend yield of 5.78%. For my benchmark, a general reasonable yield would be around 5.00%. The dividend yield is Favorable as Venture is above.
Website: Reasonable Dividend Yield 2024Q4 – 5.00%
If using dividend yield of 6.00% as a benchmark, based on the dividend of SGD0.750 there is potential for Venture to see its share price drop by another 3.7% to SGD12.50. This may occur should the interest rates and yield of safe assets increase.
| Yield | Share Price | Downside |
|---|---|---|
| Current (5.78%) | 12.98 | – |
| 6.00% | 12.50 | -3.7% |
| 7.00% | 10.71 | -17.5% |
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | -3.9% | Unfavorable |
| Earnings per share | No Update | Unfavorable |
| Operating Cash Flows | -8.9% | Unfavorable |
| Gearing ratio | No Update | Favorable |
| Interest coverage | No Update | Favorable |
| Price to Book Ratio | 1.32 | Unfavorable |
| Overall | Neutral |
Overall, the metrics indicate that it remains Neutral to invest in Venture. The key thing to note is that there was softer customer demand this quarter, which was different from management expectations in their last financial update. Investors will need to continue to monitor.
Background
Established in 1989, Venture is a leading provider of technology services, products and solutions to over 100 global brands across the world. Headquartered in Singapore, they harness the collective strengths of their 12,000-strong team globally in differentiated capabilities spanning R&D, product industrialization, advanced manufacturing, supply chain solutions and product lifecycle management.
Over the years, they have built in-depth knowledge and differentiated capabilities in numerous technology domains. These include Life Science and MedTech; Lifestyle and Wellness; Smart Industrial; Test Measurement and Instrumentation; NextGen Communications and other breakthrough technologies.
With more than 5,000 products and solutions and over three decades of experience in advanced manufacturing technology, they will continue to expand into new technology domains through its collaborations with their customers and partners in selected ecosystems of interest.
Previous Post
Website: Venture Corporation Limited (SGX: V03): 2024 Half Year Result
