Venture Corporation Ltd (SGX: V03) is an electronics manufacturing services provider with expertise in a wide range of activities.
In the last few months, investors have become worried about companies with exposure to the semiconductor industry. As a result, these companies have seen significant declines in their share prices. Venture was not spared either. At the current level of S$18.04 (at the time of writing), Venture’s share price is trading at 39% below its 52-week high of S$29.65.
Many might point out that such a decline might be warranted due to higher uncertainties in the global economy caused by issues such as the trade war between the US and China. Despite all the negative sentiments, there are still a number of things to like about the company. Here are three of them. [Editor’s note: An article sharing two more positive traits about Venture has been published. It can be found here.]
Strong financial track record
One of the most important traits that investors should seek in a company is an ability for the company to sustain its profits in the foreseeable future. To assess this, we can look at the company’s track record for a minimum of five years.
In Venture’s case, the company has a shown a positive track record of growth over the past five years.
The company’s revenue grew by 74% from S$2.3 billion in 2013 to S$4.0 billion in 2017. Similarly, net profit attributable to shareholders surged by 185% from S$130.9 million to S$372.8 million over the same period.
Positive recent earnings update
Not only did Venture deliver strong revenue and profit growth in the last five years, it has also delivered a positive performance in its latest earnings update.
In the quarter ended 30 June 2018, Venture reported that profit attributable to shareholders was up by 40.2% year-on-year to S$97.9 million. Similarly, its diluted earnings per share was up by 37.7% to 33.6 cents. Although revenue was down by 6% to S$952.3 million, the company more than made up with the improvement in its profit margin.
Nevertheless, Venture did point out in its outlook statement that some volatility may arise in the near term from “customer M&A, new platform/product transitions and also possibility of escalation of trade war and component shortages.” This is something investors should take note of.
Strong cash flow generation
A company that can generate earnings is of little use to investors if such profits cannot be converted into cash for future investments and dividend payments. As such, it’s important to pay attention to a company’s operating cash flow over a period of time.
In the case of Venture, it has been delivering positive operating cash flow for the last five years. Not only that, it has managed to grow its operating cash flow from S$122.9 million in 2013 to S$499.9 million in 2017. Moreover, it also generated S$125.5 million in operating cash flow for the six months ended 30 June 2018.
In all, Venture has proven to be a strong cash generating machine.
The Foolish conclusion
Mr Market is not particularly fond of Venture for now. Yet, investors should not neglect the aforementioned positive points about the company when doing their research on it.
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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 Lawrence Nga doesn’t own shares in any companies mentioned.