Venture Corp (VMS) reported a 19.9% YoY decline in its 2Q12 PATMI to S$33.6m on the back of a 2.7% drop in revenue to S$611.8m. Topline was within our expectations, although bottomline missed due to lower-than-expected margins from a change in product mix. For 1H12, revenue of S$1,186.1m (-2.5% YoY) and PATMI of S$69.1m (-16.8% YoY) formed 46.1% and 40.1% of our FY12 projections, respectively. Management cited an increase in caution among its key customers given the continued macroeconomic uncertainties, although new product launches are still expected to occur in 2H. We believe that the recovery momentum in 2H would be less robust than we had previously expected. Hence we slash our FY12/13F PATMI forecasts by 12.8/11.2%. But VMS remains in a healthy financial position and offers an attractive FY12F dividend yield of 7.1%. Our fair value is revised from S$9.41 to S$8.72 given our lower estimates, but partially offset as we roll forward our valuations to 15x blended FY12/13F PER. Maintain BUY.
2Q12 PATMI below expectations
Venture Corp’s (VMS) 2Q12 revenue declined 2.7% YoY to S$611.8m, but this was within our expectations. PATMI fell 19.9% YoY to S$33.6m. This came in below our expectations due to lower-than-expected margins, attributed largely to a change in product mix as 2Q12 saw stronger volume sales from lower-margin products. PATMI was also boosted by a S$3.2m gain on disposal of available-for-sale investments. Sequentially, topline grew 6.5% but bottomline declined 5.3%. For 1H12, revenue of S$1,186.1m represented a YoY fall of 2.5%, or 46.1% of our original FY12 projection. PATMI dipped 16.8% to S$69.1m, forming 40.1% of our full-year estimates.
2H recovery could be slower than previously expected
While we maintain our belief that FY12 would be a back-end loaded year for VMS, we opine that the recovery momentum in 2H would be less robust than we had previously expected. This stems from increasing cautiousness amongst key customers against the backdrop of the ongoing macroeconomic uncertainties. Management highlighted that it was more difficult to get a firmer visibility from customers, although there would still be new product launches, mainly from networking and communications, industrial and life sciences towards end 2012. We believe that more meaningful contribution would only come in FY13. VMS would seek to intensify its engagement with key customers with the aim of gaining more market share.
Lower estimates, but still a BUY
In light of the still-tepid industry conditions, we slash our FY12/13F PATMI forecasts by 12.8/11.2% largely on softer gross margin assumptions. Nevertheless, VMS’s financial position remains healthy, in our view, with net cash of S$227.4m as at 30 Jun 2012. We forecast the group to generate S$146.8m in FCF in FY12. This would solidify its ability to at least maintain its DPS payout of 55 S cents in FY12F, in our view, which translates into a yield of 7.1%. Maintain BUY with a revised fair value estimate of S$8.72 (previously S$9.41) given our lower estimates, but partially offset as we roll forward our valuations to 15x blended FY12/13F PER.
Venture Corp’s (VMS) 2Q12 revenue declined 2.7% YoY to S$611.8m, but this was within our expectations. PATMI fell 19.9% YoY to S$33.6m. This came in below our expectations due to lower-than-expected margins, attributed largely to a change in product mix as 2Q12 saw stronger volume sales from lower-margin products. PATMI was also boosted by a S$3.2m gain on disposal of available-for-sale investments. Sequentially, topline grew 6.5% but bottomline declined 5.3%. For 1H12, revenue of S$1,186.1m represented a YoY fall of 2.5%, or 46.1% of our original FY12 projection. PATMI dipped 16.8% to S$69.1m, forming 40.1% of our full-year estimates.
2H recovery could be slower than previously expected
While we maintain our belief that FY12 would be a back-end loaded year for VMS, we opine that the recovery momentum in 2H would be less robust than we had previously expected. This stems from increasing cautiousness amongst key customers against the backdrop of the ongoing macroeconomic uncertainties. Management highlighted that it was more difficult to get a firmer visibility from customers, although there would still be new product launches, mainly from networking and communications, industrial and life sciences towards end 2012. We believe that more meaningful contribution would only come in FY13. VMS would seek to intensify its engagement with key customers with the aim of gaining more market share.
Lower estimates, but still a BUY
In light of the still-tepid industry conditions, we slash our FY12/13F PATMI forecasts by 12.8/11.2% largely on softer gross margin assumptions. Nevertheless, VMS’s financial position remains healthy, in our view, with net cash of S$227.4m as at 30 Jun 2012. We forecast the group to generate S$146.8m in FCF in FY12. This would solidify its ability to at least maintain its DPS payout of 55 S cents in FY12F, in our view, which translates into a yield of 7.1%. Maintain BUY with a revised fair value estimate of S$8.72 (previously S$9.41) given our lower estimates, but partially offset as we roll forward our valuations to 15x blended FY12/13F PER.
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