Venture Corporation Ltd’s Stellar 2017: What Investors Need to Know About Its Latest Earnings

Last week, Venture Corporation Ltd (SGX: V03) announced its financial results for the full year ended 31 December 2017. Here are 10 things investors should know from the earnings announcement:

1. Revenue surged 39.3% to a record S$4 billion in 2017.

2. Research and development (R&D) expense increased 35.2% year-on-year to S$49.9 million. As a percentage of revenue, R&D cost was 12.5% in 2017 as compared to 12.8% in 2016.

3. Net profit ballooned from S$180.7 million in 2016 to a high of S$372.8 million in 2017, marking a 106% increase. The far-superior profitability was due to revenue growth, higher value creation through engineering design and development, and operational excellence across several technology domains. A one-off gain from the disposal of an investment in an associate also contributed to the improvement in the bottom line. Excluding this gain, net profit for 2017 would have been lower at S$361.5 million, but still up a remarkable 100% year-on-year.

4. Consequently, diluted earnings per share improved from S$0.65 to S$1.30.

5. Net profit margin for 2017 stood at 9.3%, up from 2016’s 6.3%.

6. Venture’s balance sheet strengthened during the year. As at 31 December 2017, Venture had S$752.4 million in cash and bank balances, with just S$30.8 million in total debt. This gave a net cash position of S$721.6 million. In comparison, it had a lower net cash position of S$407.1 million at the end of 2016.

7. Return on equity (ROE) for 2017 came in at 17.2%, an improvement from the ROE of 9.2% seen in 2016.

8. The company generated S$448.5 million in cash flow from operations. With capital expenditure coming in at S$37 million, it raked in S$411.6 million in free cash flow. This compares with the free cash flow figure of S$197.8 million in 2016.

9. Shareholders would be delighted to note that they would get a higher dividend for 2017. A first and final dividend of 60 Singapore cents per share has been proposed for the year, an increase of 20% as compared to 2016. The latest dividend translates to a payout ratio of 46%.

10. Looking ahead, Venture said:

“In 2017, Venture’s focus on its strategic thrusts, transformational engineering and operational excellence has delivered a stellar set of financial results. Venture remains confident that it is well placed to create significant value for the benefit of its partners. However it is expected that the business environment may remain volatile. The next leap forward will entail more intensive preparation and investment in the development of new engineering and advanced manufacturing capabilities. Venture continues to relentlessly grow an able and resilient talent pool with strong technical, professional and leadership qualities.”

At the closing price of S$26.80 yesterday, Venture was selling at around 21 times its historical earnings (excluding the one-off gain) and had a dividend yield of 2.2%.

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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 contributor Sudhan P doesn’t own shares in any companies mentioned.