How Venture could milk gains from 3D printing business

All eyes are on this next cash cow.

According to Maybank Kim Eng, during its recently hosted NDR for Venture, every single client was interested in the company’s budding 3D printing business.

At this stage, things are still fluid and it refrains from forecasting 3D printer contribution in detail.

"Our best guess is for a low-single-digit contribution to revenue in FY14 and high single-digit to low-double digit contribution in FY15," says Maybank.

Here's more:

For FY14, the 3D printer from Venture’s customer is likely at a prototype stage. It is not uncommon to have multiple prototype revisions. The earliest possible time for a fast-track product launch by the customer could be toward the end of 2014.

The forecast range for FY15 is wide as much depends on the customer’s efforts to penetrate and expand its market size. Should it decide to develop more mid-range products where manufacturing volume is higher, a double-digit revenue contribution would be more probable, in our view.

We are optimistic that customers will continue to drive the market to grow at faster rates, boding well for future growth. We note that Stratasys, a leading US 3D printer company, recentlyguided for above-consensus revenue of USD660-680m in 2014 against expectations of USD655m.

Margin-wise, Venture typically earns 25-45% at the gross level for ODM business, with the higher margin possible if it offers a new proprietary solution to the customer.

We think one of its highest value-added activities will be in the area of material delivery, given its long expertise in ink delivery mechanisms for 2D printers.

Other areas would be high precision electro-mechanical movements, again due to its track record in 2D printers among others. Once the product goes into mass production, we believe a normal margin of 20% gross and 6-8% net would apply

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