Wednesday, August 14, 2013

Venture

Venture: Results were below consensus, although the grp saw an improvement from its last qtr performance, with net profit at $30m (-11% y/y, +7% q/q), partially dragged by a higher-than-expected tax expense. The better q/q comparison was driven by higher revenue in particular from Test & Measurement where Venture enjoyed market share gains from existing customers, and Printing & Imaging which stabilised after a horrendous 1Q. Retail Store Solutions was decently stable given that 2012 was a very high base. Disappointingly however, Networking & Communication continued to be dragged down by a slow M&A-related transition at major customer Hypercom, which was acquired by Verifone Going forward, management believes that the operating environment looks to have improved with most existing customers showing signs of recovery and sees sales momentum across its major sectors, while new customers including Oclaro could possibly have a higher contribution in 2H13. The company also said that it will invest in engineering and marketing capabilities to deliver innovative products and solutions. Maybank-KE note that Free cashflow for the grp has improved from just $6m in 1Q13 to $40.7m in 2Q13, which is inline with last year’s trend and does not take yet into account expectations for a significant jump in capex in 2H13 given that Venture still has to pay for the bulk of its $38m purchase of a Singapore factory. YTD capex is only about $16m but expect at least $40m in 2H13. Nevertheless, given the tight way Venture runs its balance sheet, house expect dividends to remain safe at least for FY13. Latest brokers ratings as follows: Maybank-KE upgrades to Hold with $7.63 TP Nomura maintains Buy with $9.20 TP UOB Kay Hian maintains Buy with $8.05 TP

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