Jan[1] - Venture (High yield machine)

COUNTER: Venture Corporation Limited

OVERVIEW:
Venture is a global provider of Electronics Manufacturing Services (EMS) for a wide range of high-mix, high-value and complex electronics products, such as photonics system, electron mechanical printing devices, Post of Sales (POS) machines, handheld devices, etc. Headquartered in Singapore, Venture comprises about 40 companies with global clusters in Asia, US and Europe. It is strategic partner of choice over 100 global companies including Fortune 500 corporations, such as HP, Honeywell, etc.

HIGHLIGHTS:
[1] The group saw its 3Q15 revenue up 16% to S$693m year on year. The growth was driven by market share gain among clients as well as favorable exchange rate movement. 9M15 net profit rose 9% year on year to S$109m.

[2] While contribution from segments like computer peripherals, printing & imaging have been shrinking, the group saw higher growth from segments such as life sciences, and networking & communication. Medical & life science is likely the key growth driver in medium term. One US based client, Illumina has been producing strong results in medical segment.

[3] World Semiconductor Trade Statistics suggests that semiconductor market will maintain steady growth of 3.4% in 2016 and 3% in 2017. Positive growth rate is anticipated across Asia-Pacific and Americas regions in 2016.

INVESTMENT THEMES:
[1] About 60% of Venture's shipments are to US. Considering USD being strengthened along with rising interest rate, the currency movement will be benefit to the counter. Less than 15% of shipment is derived from Singapore. Thus, it is less vulnerable the falling export index in domestic context.

[2] Almost 60% of staff cost are incurred in Malaysia. Weakening MYR vs US and SGD translates to heavy reduction in cost for the counter.

[3] Current valuation represents PE about 15 and PB about 1.2 which are in normal range. Dividend yield is about 6.1% which is attractive. The dividend payout has been consistent over past 5 years. 

PRICE TREND:
Due to its consistent payout of dividend over years, the counter has been trading in range bound as shown below. Recent falling presents hunting window.