Would Peter Lynch Buy Venture Corp Ltd?

VentureCorpVenture Corp (SGX: V03) is a manufacturer and designer of high-tech components. It has been around for 30 years and is currently worth about S$2b.

Venture specialises in printing and imaging technology. It also knows a thing or two about handheld scanners. The business is probably a bit more complicated than that. But that is probably as much of the nuts and bolts that Peter Lynch would want to know.

Venture Corp is not cheap. Its shares are valued at 16 times earnings, which is higher than the market average. Unfortunately, profits are not growing quickly, if they are growing at all. Last year, Net Income was S$131m. The year before that it was S$139m. In 2010 Net Income came in at S$188m. That is not the kind of trend that Lynch would like to see.

Interestingly, Venture Corp is cash rich. While it does have some debt on its books, the S$173m of long-term borrowings is dwarfed by its S$310m cash pile. The amount of debt to equity is, therefore, a very respectable 10%.

Venture Corp pays a dividend of S$0.50 per share, which equates to a yield of 6.2% based on the current share price of S$8.03. The payout ratio is 100%, which Lynch could find a little puzzling.

The company holds inventory but not an excessive amount. Over the last four years, it has been around S$500m. It also turns around its inventory reasonably quickly too.

Venture is profitable business but it probably doesn’t quite fit into Peter Lynch’s style of investing. Lynch is looking for companies with the ability to grow quickly and Venture doesn’t seem to have what it takes to be a fast grower.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.