Working on the growth to come. 3Q12 was another weak quarter for
Venture with earnings down 8%/3% YoY/QoQ. However, this was
expected and we retain our BUY call with a SGD9.65 price target.
Management’s guidance for 2013 being a growth year is gaining
conviction with every quarter, and the attractive yield of 7.1% is a strong
incentive to wait for that growth to come through.
2012’s a washout, we all knew that. 2012 is pretty much a washout as far as earnings go, as we have already warned. 3Q12 net profit fell 8%/3% YoY/QoQ to SGD32.6m, down from SGD35.4m and SGD33.6m respectively. The main factors were a weaker USD which led to a forex loss vs a gain a year ago, as well as a tax provision this time round vs a tax benefit a year ago. In addition, Venture incurred higher operating costs preparing for new business that is expected to ramp in 2013.
Still, the seeds of growth are budding. Nevertheless, we believe Venture continues to show steady progress toward stronger growth in 2013. Management guidance is positive and gaining conviction with every quarter. After a tough two years, we believe positive future trends are starting to form within each business segment that should be expected to gain further momentum in 2013. Currently, management is guiding for 2Q 2013 when we should see confirmation of this.
What’s expected to take centerstage in 2013. We expect to see Networking & Communication, Data Storage and Printing & Imaging take centerstage in 2013. The extraction of transition business from Oclaro, expected to show up in 4Q12 and ramp throughout 2013, should drive the N&C segment. Data Storage could get a fillip from a new tape library product of its own design that fetches higher margins if adopted by tier one OEMs. Lastly, Venture’s position as a sole supplier of a mobile all-in-one printer should continue to drive the P&I segment.
No worries on the cashflow front. Despite the weak 3Q earnings, cashflow and margins continued to improve sequentially, underpinning our confidence that Venture will continue to pay an attractive final dividend of SGD0.55 a share. Management was also confident that margins/cashflow should improve further in 2013 as the component shortage situation is easing, and the company remains confident it can further manage down inventory.
2012’s a washout, we all knew that. 2012 is pretty much a washout as far as earnings go, as we have already warned. 3Q12 net profit fell 8%/3% YoY/QoQ to SGD32.6m, down from SGD35.4m and SGD33.6m respectively. The main factors were a weaker USD which led to a forex loss vs a gain a year ago, as well as a tax provision this time round vs a tax benefit a year ago. In addition, Venture incurred higher operating costs preparing for new business that is expected to ramp in 2013.
Still, the seeds of growth are budding. Nevertheless, we believe Venture continues to show steady progress toward stronger growth in 2013. Management guidance is positive and gaining conviction with every quarter. After a tough two years, we believe positive future trends are starting to form within each business segment that should be expected to gain further momentum in 2013. Currently, management is guiding for 2Q 2013 when we should see confirmation of this.
What’s expected to take centerstage in 2013. We expect to see Networking & Communication, Data Storage and Printing & Imaging take centerstage in 2013. The extraction of transition business from Oclaro, expected to show up in 4Q12 and ramp throughout 2013, should drive the N&C segment. Data Storage could get a fillip from a new tape library product of its own design that fetches higher margins if adopted by tier one OEMs. Lastly, Venture’s position as a sole supplier of a mobile all-in-one printer should continue to drive the P&I segment.
No worries on the cashflow front. Despite the weak 3Q earnings, cashflow and margins continued to improve sequentially, underpinning our confidence that Venture will continue to pay an attractive final dividend of SGD0.55 a share. Management was also confident that margins/cashflow should improve further in 2013 as the component shortage situation is easing, and the company remains confident it can further manage down inventory.
No comments:
Post a Comment