- Maintain BUY and SGD9.50 TP, based on 16x FY15E P/E based on peer average.
- HP splitting into two: Enterprise and Printers & PCs. Now minimal 5-6% of Venture’s revenue. Only orders business, not consumer, printers.
- Split could be a long-term positive. Allows HP’s printer/PC business to be more nimble, keep cash for own expansion.
Hewlett Packard (HP) will be splitting into two publicly traded companies: HP Enterprise, focusing on cloud computing, servers, networking, business software and other tools for business; and HP Inc for printers and PCs. In Singapore, Venture supplies HP with enterprise printers (eg high-speed laserjet colour and black & white printers) that are sold to large corporations and SMEs. It does not make any more consumer printers for HP.
Minimal to positive impact
Venture’s printing & imaging business has shrunk over the years to just 11% of its revenue, after its exit from the consumer-printer market years before. We think any adverse impact from this split will be minimal. HP accounts for only 5-6% of Venture’s revenue. Venture has other printer customers such as Intermec, which makes products with better growth potential. These include transaction printers for credit-card receipts and labels.
In fact, the split may be good for HP, and by extension, Venture, as it could potentially improve HP’s nimbleness. Printer cartridges generate a lot of cash. Historically, this cash was used by HP for acquisitions unrelated to its printer/PC business. The new standalone company should be able to keep this cash for acquisitions to benefit its printer/PC business directly, which still has room for growth in emerging markets. HP's printer/PC revenue actually grew by 2% in the last 12 months, in contrast to a 4% drop by its enterprise business. No change to our EPS or TP for Venture for now.
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