Its exciting performance was driven by steady sales momentum and margin improvement.
Venture continued to wow in 4Q2017as its net profit surged 170% YoY to a record $142.9m (or $131.7m excluding contributions from Fischer Tech) on quarterly revenue of $1.09b. On a full year basis, revenues of $4b were in line while profit of $372m outperformed market expectations by over 10%, DBS Equity Research said.
DBS Equity Research analyst Carmen Tay noted that the earnings beat was driven by several factors. "We observe that performance trends have remained broadly similar to previous quarters and continue to attribute Venture’s strong showing mainly to (1) steady sales momentum, and (2) margin improvement. Overall, growth was likely to have been broad-based as the bulk of Venture’s customers – over 75% - are currently on growth mode," she added.
Capex investments are also set to grow as Venture prepares for the next stage of growth, from $37m in 2017 to a forecast of $50m for 2018. Further, a recent acquisition of a 182,405 sqft manufacturing site in the US, which lies within the prime Silicon Valley catchment area, suggests that "bigger plans and opportunities lie ahead." DBS also expects capex spending to grow due to increased R&D funding as some of these ongoing projects with higher design elements (and thus higher margins) could be converted into commercial projects later on.
On the back of strong results and divestment gain from Fischer Tech, Venture declared a higher dividend of 60 cents for 2017, versus 50 cents historically.
Tay added, "Margin improvement was the key story in 2017 and demonstrates the group’s continued success in value-creation through increased design content and uniqueness in the broader Electronic Manufacturing Services (EMS) space, with exposure to attractive end-markets such as genome sequencing and networking and communications. Expectations of double-digit growth at key industry clusters provides strong visibility for Venture’s revenue growth prospects."
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