Regional Morning Notes
Thursday, 7 August 2008
Venture Corporation
2Q08: CDO1 fully written back, moving up value chain
Venture reported a net profit of S$65.6m (+3.6% qoq), translating into 21% of our FY08 forecast. The result was slightly below our net profit forecast, mainly due to a fair value adjustment on collateralised debt obligations (CDO) that amounted to S$6.4m. Despite the non-operational charges and income, core earnings would be S$73.2m, representing 23% of our full year forecast, which is in line.
Quarterly Results (S$m) Turnover EBITDA Pre-tax Profit Net Profit Source: Venture 2QFY08 972.5 79.9 68.8 65.6 1QFY08 939.1 67.0 58.9 56.3 % QoQ chg 3.6 19.3 16.7 16.5 2QFY07 1004.7 83.6 79.1 78.7 % YoY chg -3.2 -4.4 -13.1 -16.6
SINGAPORE Venture Corp (VMS SP) BUY
Current Price: S$10.92 Target Price: S$13.50 Qian Yang (65) 6539 1838
qianyang@uobkayhian.com
Sales was up 3.6% qoq and -3.2% yoy to S$972.5m, which is in line with our sales forecast of S$973m. The sales was affected by weakening US dollar as exchange rate has been declined over 10% yoy. In US dollar terms, the revenue would have increased by 4.6% yoy. The improved performance was mainly driven by growth from Test and Measurement segments as more ODM work has been secured. The increased sales from Networking and Communications and Computer Peripherals and Data Storage also help to lift up the 2QFY08 revenue. CDO1 fully written back. As at 20 Jun 08, CDO1 has matured and Venture has fully recovered its investment of US$29.9m. At end-June, the CDO2 was valued at S$118.6m, 70.7% of host value, due largely to weak credit market condition. Venture intends to hold them till maturity on 20 Dec 09. We expect recovery of host values to S$167.8m at maturity. The necessity for further write-downs would depend on market conditions for CDOs going forward. Strength of diversified customer base, moving up the value chain. We remain positive on Venture’s steady growth in FY08, with a successfully development in diverse and balanced mix of customer, products and technologies. We believe the diversified customer base and technologies would help Venture to grow healthily despite weaker US$ and raw material price hiking. Venture is moving up the value chain, with more ODM on hand. ODM revenue contribution jumped from 20% of sales in FY07 to 35% currently. Maintain BUY. Strong net cash holding totalled S$300.5m and available-forsale investments of S$207.1m was worth S$1.85/share as at Jun 08. On excash basis, Venture trades at only 8x FY08 PE. We believe the cheap valuation limits Venture’s share price downside risk. Our target price is S$13.50 based on FY09 PE of 11x. Maintain BUY.
Sector Bloomberg Reuters Website
Contract Manufacturing VMS SP
52-Wk Avg Daily Vol. ('000) Market Cap (S$m) (US$m) Book NTA per Share (S$) ROE (%) Net Debt per Share (S$) Results Due Interim Final
12-Month House Call Tracking
Date 20/06/08 22/01/08 08/01/08 05/12/07 Rec BUY BUY BUY BUY Target Price (S$) 13.50 14.10 16.00 18.50
Price Chart
Year to Turnover Sales by Segment (1Q08) 31 Dec (S$m) 3,124.9 2006 3,872.8 2007 4,056.5 2008F 4,434.0 2009F 4,849.3 2010F
EBITDA (S$m)
Net Profit (S$)
EPS (cents)
EPS Growth (%)
PE (x)
EV/ EBITDA (x)
DPS* (cents)
280.4 327.8 373.8 391.0 432.7
239.2 300.0 306.0 324.3 366.3
88.2 109.6 111.6 118.2 133.6
17.5 24.3 1.8 5.9 13.0
12.4 10.0 9.8 9.2 8.2
11.8 9.2 7.9 7.2 6.1
50.0 58.0 50.0 55.0 55.0
*Tax-exempt. Include bonus dividend of 25 cents for 2006 and special dividend of 8 cents for 2007
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Regional Morning Notes
Thursday, 7 August 2008
& Test /Measurement Medical/ Others 16.9% Retail Store /Solutions Industrial Products Computer 19.1% & Peripherals Data Storage 19.2%
Source: Venture
& Printing Imaging 26.9% & Networking Communications 17.9%
Profit & Loss
Year to 31 Dec (S$m) Turnover EBITDA Pre-tax Profit Net Profit EPS (S$ cents) 2006 3124.9 280.4 252.6 239.2 88.2 2007 3872.8 327.8 294.6 300.0 109.6 2008F 4056.5 373.8 315.5 306.0 111.6 2009F 4434.0 391.0 334.2 324.3 118.2 2010F 4849.3 432.7 377.5 366.3 133.6
Balance Sheet
Year to 31 Dec (S$m) Current Assets Total Assets Current Liabilities Long-Term Loans Shareholders' Funds Total Equity & Liabilities 2006 1596.4 3009.9 1198.3 0.0 1759.0 3009.9 2007 1737.2 3048.5 844.3 259.3 1884.5 3048.5 2008F 1598.8 2873.7 553.6 200.0 2053.5 2873.7 2009F 1960.9 3208.3 607.9 300.0 2226.9 3208.3 2010F 2167.1 3386.7 663.2 200.0 2442.3 3386.7
Cash Flow
Year to 31 Dec (S$m) Operating Investing Financing Net Cash In/(out) flow Begin Cash & Cash Equiv. End’g Cash & Cash Equiv. 2006 144.3 (962.0) 627.4 (227.5) 556.6 329.0 2007 269.7 40.3 (99.3) 164.3 329.0 493.3 2008F 173.4 (100.0) (300.3) (226.9) 493.3 266.5 2009F 198.4 (60.0) 100.0 238.4 266.5 504.8 2010F 235.1 (60.0) (100.0) 75.1 504.8 579.9
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Regional Morning Notes
Thursday, 7 August 2008
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