Why Venture's 2014 outlook has turned worryingly weak

Electronics demand likely softer than expected.

Analysts have turned sour on their short-term outlooks for Venture Corporation due to weak Singapore electronic exports data and weaker-than-expected customer demand.

Also a cause for concern that Venture Corporation's largest shareholder, Aberdeen, sold down its shares in the open market recently, noted OSK-DMG and led the research firm to downgrade the stock to NEUTRAL and cut its FY13/14 PATAMI estimates by 3.1%/15.0% respectively.

Here's more from OSK-DMG:

Expecting weaker 4Q results. While we had previously expected Venture’s 4Q13 results to be comparable to that of 3Q13, we now expect a weaker 4Q in view of the recent disappointing NODX export readings in relation to the electronics industry. Singapore’s electronic shipments dipped 6.9% y-o-y, or 1.8% q-o-q, during the last quarter of 2013.

Short-term outlook remains weak. Our checks show that demand for some of Venture’s key customers’ products remains weak, especially in the printing & imaging as well as PC peripherals & data storage segments. While we had previously expected Venture’s business to pick up from 2014 onwards given the strong US economic recovery, we are now cautious on the actual demand in the electronics space.

Aberdeen sells some shares. Recently, Venture’s largest shareholder - Aberdeen Asset Management - which holds about 26% in the company, sold 249,000 shares in the open market for a total consideration of SGD1.9m, equivalent to SGD7.68/share.

Downgrade to NEUTRAL. Downside supported by dividends. In view of this, we downgrade the stock to NEUTRAL (from Buy) and cut our FY13 and FY14 PATAMI estimates by 3.1% and 15.0% respectively. Nonetheless, we remain confident in Venture’s ability to defend its hefty 50 cent/share annual dividend, which translates into an attractive 6.8% yield. This should limit the downside to the share price.