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 been worried over companies that are related to the semiconductor industry. As a result, many of these companies have seen significant declines in their share prices. Venture was not spared either. At the current level of S$16.67 (as the time of writing), Venture’s share price has fallen by 44% from a 52-week high of S$29.65.
Some investors may point out that this decline may be warranted as a result of higher uncertainties in the global economy caused by issues such as the trade war between the US and China. But, there are still a number of things to like about company.
In my previous article, I looked at three positive traits of Venture, which are:
1. A strong financial track record
2. A positive recent earnings update
3. Strong cash flow generation
In this article, I will share two other reasons to like the company.
Strong balance sheet
A company must be able to withstand the ups and downs in the business cycle in order to grow over a long period of time. This is especially true for Venture as some parts of its business are cyclical in nature.
To endure business cycles, a company must have a strong balance sheet so that it can (1) satisfy its existing operational and financial requirements (including paying out dividends), and (2) invest in future growth. Generally speaking, a company with a strong balance sheet will have plenty of cash and a reasonable debt to equity ratio of not more than 100%.
With that, let’s consider the numbers for Venture.
As at 30 June 2018, the company had S$688.6 million in cash on the balance sheet and S$41.7 million in total borrowings. This gives the company a net cash position of S$646.9 million.
All said, Venture’s strong balance sheet should give it significant cushion to withstand short term challenges and also the resources to invest for future growth.
Stable dividend track record
One of the key criterion that investors should look for when investing in a company is its track record in paying dividends. The key here is to look for stable, or even better, rising dividend payments over the years.
In the case of Venture, it has done just that. The company has grown its dividend by 20% from S$0.50 per share in 2013 to S$0.60 per share in 2017. Given this track record, I believe that Venture should be able to continue to pay a dividend in the future, as long as its underlying business continues to generate good cash flow.
The Foolish conclusion
Mr Market is not particularly fond of Venture for now. But investors should not neglect the aforementioned positive points about the company when conducting their research on the company.
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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.