Venture to start raking in big-time gains by 2H13

$286m current net cash could get bigger.

According to DBS, 4Q12 net profit of S$37m came in below the firm's and consensus forecast of S$41m. However EBIT margins improved to 6.2% from 5.9% in 4Q11 and 5.3% in 3Q12 despite a 6% y-o-y and 3% q-o-q decline in sales to S$593m.

Higher margin was due to an improved business mix. The lower margin Retail Store Solutions/Industrials (RSSI) loadings had normalised from the high run-rate in the previous quarters.

Here's more from DBS:

We deemed this a small reduction. Importantly, the implied 5.8% dividend yield is still decent and remains amongst the highest in the market.

Given new customer engagements, we understand management’s viewpoint to reinvest earnings in growth. Venture generated S$99m of FCF in FY12 and closed the year with net cash of S$286m.

Expect better 2013 but more strength in 2H. Market share gains and new programme wins are expected to start only in 2H13. Growth segments are Networking / Communications and potentially Data Storage.

RSSI is expected to sustain its margins whereas Printing & Imaging and Test & Measurement would remain subdued before new accounts gain traction.

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