The Motley Fool

1 Singapore Blue-Chip Share That Has Built Up Solid Financials Over the Past 5 Years

Venture Corporation Limited (SGX: V03) is a global provider of technology solutions, products and services. The group has established capabilities in marketing research, design, and development and engages in manufacturing and supply chain management. Venture has global clusters in Southeast Asia, Northeast Asia, the US, and Europe and employs over 12,000 people worldwide.

Venture is a leading contract manufacturer serving the electronics industry and is one of the leading blue-chip companies in Singapore, with a market capitalisation of close to S$4.7 billion. Investors who have the impression that large companies may not have much growth will be surprised to learn that this stalwart has registered strong growth in the last five years.

Let’s look at three aspects of Venture that help demonstrate its growth trajectory.

Rising revenue, profits and profit margin

Venture’s revenue grew by 41.3% over the last five years, as advances in artificial intelligence and the development of the Internet of Things led to a new wave of demand for electronic products, components, and sensors. Venture benefitted by being a player with diverse capabilities and was thus able to take advantage of this trend and grow rapidly.

The group’s business enjoyed strong operating leverage, as profit rose at a faster clip than revenue, more than tripling over the last five years. Net profit margin also improved significantly from 3.1% to 10.6% in just five years.

Free cash flow

Venture generated strong free cash flow over the last five years and was consistent in doing so. Capital expenditure is being kept at a manageable level for the maintenance of machinery used in manufacturing, and this trend is likely to continue for the foreseeable future unless Venture reports a need to overhaul its equipment.

Dividends

Venture’s dividends have also steadily risen in line with its profitability, and FY 2018 was the first year in the last five years where the group paid an interim dividend. For Q1 2019, Venture continued to report growth, with 8.5% year-on-year growth in revenue and 8.6% year-on-year growth in net profit. If this trend continues, the group should be able to continue to pay twice-yearly dividends at the current rate or better. Venture’s historical dividend yield was 4.2%.

The power of long-term investing

Venture’s share price has soared along with its profit and dividends. Five years ago, Venture was trading at S$7.95. The last traded price for Venture was S$15.67, and the rise over these five years was an impressive 97%. If an investor had simply held on to his shares for the last five years, he would also receive a total of S$2.80 in dividends. The total return inclusive of dividends would then be 132%, and this superb return attests to the power of long-term investing in great companies.

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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.