Venture Corp

[AlphaQuant]

i was looking through Venture's numbers over the last few years.

It has a low gearing and a strong cash position, which probably allowed it to survive GFC pretty well, but i was surprised it got involved in the CDOs and some derivatives (not sure if those were for hedging or speculation). The revenue has been decreasing gradually and it shows up in the lowering EPS. It has been paying out 50c of dividends annually, which i guess helps to prop up the stock, but the margins, while not razor thin, is not something to gasp at either.

Does anyone know what Venture's competitive advantages are? I think it is still a pretty large ESP firm globally, so what makes this possible?

Ultimately I am trying to see what makes a player tick like Hon-Hai in this industry, and the expected life of Venture (10 yrs? 20yrs?)

[Bibi]

Its because it is involved in CDO that cause its share price to plunge to 4 plus dollars during the GFC. This stock was one of my largest holdings during that time. Chairman/CEO Wong Jit Leong sits on the DBS board of directors so i am not surprise Venture Corp is invested in CDOs. CEO say the decision to invest in CDO was due to previous Chief Financial officer who subsequently resigned. Reason was to get higher returns for its bulging cash pile. What i like about this stock is consistent dividend paid regardless of share price. Its free cash flow/profits each year is able to sustained the dividend payout. It paid out 55 cts for last FY. This FY i believe profit/free cash flow will not be enough for 50 cts dividend though management mention it will maintain 55 cts payout. This will mean it will eat into its existing cash pile. This is also the reason why i have par down my stakes significantly.

A few of venture management team were previously from HP. Even the CEO himself is from HP. So i believe Venture have good working relationships with them.

Revenue has declined over the years due to HP decision to subcontract its printers manufacturing to Foxcon (cheaper mah). Venture argument is it prefers to focus on higher margin products and free up resources from manufacturing low margin products like consumer's printers. Venture has been quite unlucky for past few years as I think 2 of its major customers got bought over.

Venture advantage is its strong management team. Damn good at cost cutting. But CEO is already 70+ old i think. Profit margin is one of the highest compared to its peers. It does not incur high capital expenditures unlike some electronic contract manufacturers.

[AlphaQuant]

Thks for the insight - much appreciated.

from what i understand abt the ESP/ECM business - margins are cut throat - Foxcon makes use of the very cheap labor (and rumored to be very harsh working conditions) to keep labor costs low. In addition, the relationship between Foxcon and Apple, e.g, is very tight - Foxcon promises that it will always stay as a B2B business and not go down the route of the usual Taiwanese ECMs to eventually establish their brands (e.g. ASUS/ASUSTEK) so as to reduce the threat of competition to their clients.

when i was pricing the fair value of the stock, it seems that the valuation is still quite high, given that this is not (to me) a growth stock and there's a fair bit of intangibles/goodwill involved.It seems that the 50c dividend is the main thing propping the price up - and it looks increasingly impossible to maintain this, given the EPS is falling below that yield if the trend remains.

Not very sure what happens to the firm if Mr Wong Ngit Liong calls it a day as well.

[BeDisciplined]

Not all ECM are the same. Broadly speaking, they can be classified into OEM vs ODM and high volume vs high value. One ECM cannot be all to all customers. Even for ODM, they have to focus on different specific segments. So each has it niches as long as it remains one of the strongest in that niche

[specuvestor]

Venture is into very niche low volume products with even ASIC capabilities. It is not in the same business as Foxconn. What that means is that revenue is difficult to cross $S1b inflation adjusted per quarter, but stable strong cashflow depends largely on customisation capabilities.

NL Wong has been very prudent to the extend of being "ngeow". The CDO fiasco is largely the ex CFO issue. The structure was extremely weird according to the current CFO. It defaults when 3 of the credit defaults. And they actually tell me it is less risky as the list of credit exposure is more than 100???? Err I think that means probability INCREASED not decreased. In short, they went into something they don't even understand except for the yield, like many retailers did.

[Bibi]

For many donkey years, Venture Corp has never do any share buy back. Even when during the GFC its share price drop till $4. Few days back and today, they did some share buy back. Today is a joke. Bought back only 7 lots.

[Bibi]

Aberdeen bought 211 lots of Venture shares in open market on Fri. This is what i call serious buying. Those multimillionaires CEO who made share purchase anything less than $500k are for show only.

[a74henry]

What is Venture's competitive advantage? Who are its competitors?

[felixleong]

SINGAPORE – Electronics manufacturer Venture Corp on Tuesday reported second-quarter profit fell 10.6 per cent to S$30.1 million from the same period last year, mainly due to higher income tax provision.

Revenue for the three months ended June edged down 3.9 per cent to S$587.7 million.

“Demand from existing customers is showing signs of recovery. The group will also benefit from increasing revenue contribution from customers won in 2012 and new products launched recently,” the company said.

[Ray168]

Just sharing.... not vested.

Let's look at other dimension.... CEO's remuneration is lower year after year, inline with lower earning (EPS). Sound logical?

It's revenue and earning keep dropping and look like there is no games changer product to revive its profitability.