On 22 February 2024, Venture Corporation Limited (“Venture”) have announced their full year result for 2023. The results are in line with expectations, given the slowdown in their industry. The share price has risen over the last few weeks, likely in anticipation of the upcoming dividend and also supported by the share buy-backs over the last few weeks. They are also currently in a healthy financial position, with no debt and generating sufficient operating cash flows for a sustainable dividend payout.
Website: General Announcement::Executive Summary And General Comments For 9M 2023
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 | -21.7% | -18.8% |
Revenue decreased by a total of 21.7% to SGD3,025 million as compared to SGD3,864 million in the previous financial year. The decrease was due to continued softer market demand attributable to weaken macroeconomic condition and customers inventory destocking. This is an Unfavorable aspect of a dividend stock.
Earnings per share
| Metrics | Current | Previous |
|---|---|---|
| Earnings per share | -26.9% | -25.2% |
The net profit saw a decrease by 26.9% to SGD271 million compared to SGD370 million in the previous financial year. Accordingly earnings per share also decreased by 26.9% to SGD0.928 per share. This is Unfavorable.
The decrease mainly arose from the decrease in gross profit, as seen that “revenue” has decreased by approximately SGD800 million while “changes in finished goods, work in progress and raw materials used” decreased by only SGD650 million, registering a net decrease in gross profit of approximately SGD150 million. The remaining cost savings came from employee benefits expense, where the decrease was due to reduction in subcontract labour and lower overtime charges.
Operating Cash Flows
| Metrics | Current | Previous |
|---|---|---|
| Operating Cash Flows | +93.8% | No Info |
Operating cash flows improved significantly by 93.8%, generating SGD521 million for 2023 as compared to SGD269 million for 2022. This was mainly attributable to better collection of trade receivables and reduction in inventory. The cash flow generated from operations is also more than sufficient to pay the expected dividend payout annually of SGD218 million. The metrics is Favorable.
Debt-to-equity ratio
| Metrics | Current | Previous |
|---|---|---|
| Debt-to-equity ratio | 25.3% | No Info |
Debt-to-equity ratio stands at 25.3% as of 31 December 2023, using total liabilities of SGD717 million and total equities of SGD2,838 million. Venture has no external borrowings except for lease liabilities due to their right-of-use assets. The metrics is Favorable.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 457.9x | No Info |
The interest coverage stands at 457.9 times as of 31 December 2023, using profit before tax of SGD331 million and interest expense of SGD0.458 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 | 1.33 |
Price-to-book (“P/B”) ratio stands at 1.44. This is computed using Net Asset Value (“NAV”) of the Group as of 31 December 2023 of SGD9.76 per share and the closing share price of SGD14.05 as at 14 March 2024.
The metrics is Unfavorable as investors will be paying a significant premium for its assets. The recent sharp fall in share price also is an indicator for what might happen to companies trading at higher ratios when they report unfavorable results.
Dividend yield
| Year | Yield | Total |
|---|---|---|
| 2024 | 3.56% | SGD 0.500 |
| 2023 | 5.34% | SGD 0.750 |
| 2022 | 5.34% | SGD 0.750 |
| 2021 | 5.34% | SGD 0.750 |
| 2020 | 5.34% | SGD 0.750 |
| 2019 | 4.98% | 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 14 March 2024, with a closing share price of SGD14.05 and payout of SGD0.750, this translates to a stable dividend yield of 5.34%. For my benchmark, a general reasonable range would be around an average of 5.25% to 6.25%, and Venture is within the range. The dividend yield is Favorable.
Website: Reasonable Dividend Yield 2024Q1
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Revenue | -21.7% | Unfavorable |
| Earnings per share | -27.0% | Unfavorable |
| Operating Cash Flows | +93.8% | Favorable |
| Debt-to-equity ratio | 25.3% | Favorable |
| Interest coverage | 457.9x | Favorable |
| Price to Book Ratio | 1.44 | Unfavorable |
| Overall | | Neutral |
Overall the metrics indicate that it is neutral to invest in Venture. The fall in revenue and earnings per share is not unexpected given that there is a slowdown in their industry. Moving forward, we will see if Venture performs better in 2024 against the lowered base of 2023.
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 Third Quarter Business Update
