Venture Corporation Ltd  (SGX: V03) is a provider of technology products, services and solutions for multinational clients.

The group comprises over 30 companies and manages a portfolio of over 5,000 products.

Its products serve customers in a variety of sectors, including life sciences, financial technology and network & communications.

Earlier this week, Venture released its full-year 2020 (FY20) earnings.

The  blue-chip  technology company reported a net profit of S$297.3 million for FY20, a year on year decline of 18.1%.

Additionally, the group&rsquo s revenue fell by 17.1%, to S$3.0 billion.

The decline in profits can be narrowed down to a rough start to 2020 for Venture.

Early last year, the first wave of COVID-19 infections forced the company&rsquo s factories in China, Spain, USA and Malaysia to go under lockdown.

With the lockdowns impacting Venture&rsquo s ability to fulfil customers&rsquo orders, net profit in the first quarter of 2020 (1Q20) fell by 33.6% year on year.

Meanwhile, revenue in 1Q20 also fell 27.5% year on year to S$673 million.

A gradual recovery

Venture adapted to the pandemic by pivoting its production lines to produce essential goods used to combat the pandemic.

These products include ventilators and other instruments used to test for COVID-19.

Meanwhile, demand for semiconductor-related equipment and communication network modules also remained strong.

Venture&rsquo s operations were also boosted when factories were allowed to reopen in May and June.

These factors caused Venture&rsquo s profits to rebound, recording a sequential quarter on quarter growth.

Net profit in the second half of 2020 was S$166.8 million, a 27.8% improvement from the first half.

Revenue also picked up during the same period, growing by 20.6% to reach S$1.65 billion.

Despite the rebound, Venture&rsquo s fourth-quarter net profit of S$86.7 million still represented a year on year decline of 10%.

Dividends increased

Even though profits fell, Venture managed to raise its  dividend  for the first time since 2018.

The company declared a final dividend of S$0.50 per share, which brings the total dividend for 2020 to S$0.75, a 7% increase from 2019.

The increase is a signal of Venture&rsquo s confidence in its business prospects and cements the company&rsquo s reputation as a reliable dividend-paying stock.

Venture&rsquo s consistent dividends are due to the company&rsquo s ability to generate free cash flow.

Venture&rsquo s cash flow from operations was S$498.6 million in 2020, a 71% increase from 2019.

As of 31 December 2020, the company had a net cash position of S$928.7 million, with no debt outstanding.

Incoming opportunities

As a trusted partner of many leading technology companies, Venture has already established itself as a reputable brand.

The company has a diverse spread of R& D capabilities and technical know-how across various technology sectors, and this diversity allowed Venture to stay resilient throughout the pandemic.

With data usage and demand for technological advancements set to boom in the coming years, Venture&rsquo s impressive capabilities leave it well-poised to capture gains from these structural trends.

Venture has also announced plans to expand its capabilities in fast-growing sectors such as genomics, artificial intelligence, and battery electric vehicles.

The technology giant also has a backlog of new products that will be rolled out in 2021. Their release was delayed due to the outbreak of the pandemic.

With strong capabilities backed by favourable tailwinds, Venture looks poised for a fruitful year ahead.

 

​

The news

President Biden has mandated a 100-day review of supply chains for critical materials, with the aim of eventually increasing domestic production of these materials. The review includes semiconductors, which are in serious shortage and delaying production lines. US semiconductor firms account for 47% of global chip sales but only 12% of production. Reasons for the shortage are:

1. Increased demand for electronics from remote working and social restrictions
2. Limited manufacturing capacity with production outsourced to a few big players. TSMC owns more than half of the market for chip contract manufacturing. It is one of the few with the technology to produce the most advanced versions
3. US-China tech tensions. US restrictions on SMIC, China&rsquo s largest manufacturer of semiconductors, may aggravate supply bottlenecks for the other chip manufacturers.

TSMC expects to spend $25-$28bn in 2021 to make advanced chips, 45-63% higher than $17.2bn in 2020. The surge in capital expenditure points to longer-term growth opportunities.



 

We do not expect a quick fix in the near term. Expanding production capacity takes months or years. The lead time from equipment orders to actual output is estimated to be 9-12 months. We also expect Biden&rsquo s tough policy on China to stand. This implies that production constraints could continue to weigh on chipmakers&rsquo sales potential through 2021.

 

However, we remain positive on the sector&rsquo s longer-term outlook. As production ramps up over time, backlog orders should lift sales. Inventory-building by customers to safeguard supplies may also spur demand. Some chipmakers such as TSMC and NXP Semiconductors are already raising prices due to tight supply. We believe their price hikes may be sticky and hard to reverse even when supply constraints ease. This may then translate to higher margins.

Longer-term trends

Despite supply-chain disruptions, global semiconductor sales were resilient in 2020, growing 5.1% YoY (Figure 3). This was a by-product of mobility restrictions and remote working. Global semiconductor sales are projected to increase 8.4% YoY in 2021 to US$4.69bn, from US$4.33bn in 2020, sustained by ongoing demand from new end-users.

 

About the author

Yeap Jun Rong
Research Analyst
Phillip Securities Research Pte Ltd

Jun Rong currently covers the U.S market, with focus on FAANG stocks. Previously an investment specialist, he constantly keeps in touch with the latest market trends to serve the needs of clients. Jun Rong also features in different media platforms such as Channel 8&rsquo s Morning Express show and provides market commentary for various newspaper like LianHe ZaoBao (联 合 早 报 ) and Business Times. Jun Rong graduated from National University of Singapore (NUS) in 2017 with a Bachelor of Social Sciences with major in Economics.

Amala Balakrishner  Published on Thu, Mar 04, 2021 / 12:45 PM GMT+8 / Updated 2 hours ago

Singapore&rsquo s manufacturing activity remained positive for the eighth consecutive month in February, although momentum appears to have tapered off slightly.

  Data released by the Singapore Institute of Purchasing and Materials Management (SIPMM) shows a 0.2 point dip in the republic&rsquo s Purchasing Managers&rsquo Index (PMI) to 50.5. 

  This follows the 50.7 point expansion logged in the month before.

  The PMI index is a key barometer indicating a nation&rsquo s manufacturing activity. A reading above 50 indicates an expansion in output, while that below 50 points to an industry shrinkage.

  SIPMM attributes the latest showing to lower expansion rates in the indices of new orders, new exports, factory output as well as a faster rate of supplier deliveries.

 

  Meanwhile, the electronics PMI &ndash a separate metric &ndash had also dipped by 0.2 points to 50.8 in February.

  This follows slower expansion rates in the indices of new orders, new exports, factory output and inventory, SIPMM notes.

  Still, this marks the sector&rsquo s seventh consecutive month of expansion.

  To economists, the expansionary nature of the two metrics spells good news despite the slowdown in momentum.

  UOB economist Barnabas Gan for one says that the moderation in February&rsquo s PMI could be due to seasonal factors such as the Chinese New Year holidays which may have affected manufacturing export and labour demand.

  Even so, he says that the fact that the metrics remain expansionary, indicates that Singapore&rsquo s industrial production is likely to grow further. 

  To prove his point, Gan points out that both import and export PMI readings have been hovering above 50 since 3Q2020 ended last September. This shows that Singapore&rsquo s external environment has continued to improve, he adds.

  Agreeing, OCBC economist Selena Ling says that the pullback in the readings was &ldquo unsurprising&rdquo since China&rsquo s Caixin manufacturing PMI slipped more than expected from 51.5 in January to 50.9 in February.

 

  This correspondingly triggered similar pullbacks in the PMI readings in India, Indonesia, Malaysia, Thailand and Myanmar, she notes.

  " The moderation is likely attributable to the resurgent Covid-19 cases and tightening of social restriction measures across many parts of the global economy, but there is light at the end of the tunnel in the form of an acceleration in the global roll-out of vaccines," Ling elaborates.

  Going forward, she expects both the manufacturing and electronics sectors to continue being &ldquo in the driver&rsquo s seat&rdquo for the Singapore economy in 1Q2021 ending in March. However, she cautions that the growth momentum could ease from that seen in 2H2020.

  " We tip Singapore' s 2021 industrial production growth forecast at 3.5% y-o-y, although the global chip shortage may herald more upside for manufacturing growth at this stage," mulls Ling.

  " One silver lining is that the global chip shortage should continue to drive the electronics sector in the near-term, with North Asian trade data, especially semiconductor exports, already reflecting the lift from stronger orders,&rdquo she adds.

  Meanwhile, Gan has pencilled a 3% y-o-y growth in industrial production.

  Upside risks to this include a quicker-than-expected roll out of the Covid-19 vaccine while downside risks could come from uncertainties surrounding the pandemic and the recent rise in geopolitical tensions, he notes.

 

 

Philip Morris USA Plots Expansion Path for IQOS

Atiqah Mokhtar  Published on Wed, Mar 03, 2021 / 4:55 PM GMT+8 / Updated 1 hours ago

Stocks with stronger upcoming dividend payouts will likely gain more traction as ex-dividend dates loom closer. Large cap stocks with the highest upcoming dividend rates and yields include  Wilmar International, ST Engineering, Venture Corp, SembCorp Industries  and  UOL, while smaller stocks include  China Everbright,  APAC Realty, CSE Global, Sasseur REIT, Frencken  and  Straits Trading.

https://www.theedgesingapore.com/capital/brokers-calls/dbs-sees-seasonal-support-ahead-sti-ex-dividend-period-approaches

 

Analysts see a 11.4% upside on the electronics service provider&rsquo s share price, which is down 1.4% this year.
What&rsquo s the outlook for the rest of 2021?

In its earnings release, Venture says it &lsquo has amassed rich R& D capabilities and technical knowhow across various technology domains&rsquo .

&lsquo Leveraging on this breadth of diverse experience, we are excited about the opportunities for us to grow in our existing domains and enter new ones,&rsquo the company said, adding that it has made good headway in the Life Science Technologies, Medical Devices/Equipment and Lifestyle and Wellness Consumer Products domains.

The company will also continue to prioritise talent recruitment and development, as well as ramp up its bench strength to integrate new differentiating capabilities.

In terms of share price outlook, the stock has received an average 12-month price target of S$21.338, which represents an upside of 11.4% from the last traded price.

The stock also received a consensus rating of &lsquo outperform&rsquo from brokers polled by SGX StockFacts.

The latest rating came from Maybank analyst Gene Lih, who maintained a &lsquo buy&rsquo recommendation.

However, he lowered his price target to S$22 from S$23.27 previously, on a lower earnings forecast for 2021 and 2022 of between 4% to 5%.