Business Profile
Venture Corporation is a global provider of technology products and solutions. It is best known for its superior capabilities in Original Design Manufacturing (ODM) and in providing high-mix, high-value and complex manufacturing. Its technology ecosystems span four segments, namely, Advanced Industrials, Consumer/Lifestyle, Financial Technology, and Life Science & Instrumentation
SWOT Analysis
Strength: Venture has a unique defensible ecosystem that competitors might find hard to copy. Additionally, they have strong coveted partnerships with other technology companies in various attractive end-markets which allows the firm to command higher margins.
Opportunities: The business is looking to bring in new products and expanding into non-traditional markets. Moreover, improvement in US-China trade relations may grant newer business opportunities ahead.
Weakness: Venture has broad exposure to markets in the US, EU, and Asia. A global slowdown could impact Venture due to its vulnerability to business cycles. Additionally, the business is quite capital intensive, with cashflows being affected heavily by working capital conditions and capital expenditures.
Threats: The company could be affected by political instability in Europe due to the adoption of restrictive trade policies by the US. Furthermore, due to large exposure to the US currency, a weakened USD against SGD and low-interest rates conditions could affect Venture significantly.
Financials
Income Statment
Source: Venture Corporation Annual Report FY2018
As a whole, revenue has been increasing over the past few years. It increased from $2.5bn 5 years ago, to $3.5bn in 2018. Such consistent and significant growth in revenue could indicate that there is a growing demand for their services and Venture is able to fulfill them. Unsurprisingly, the cost of producing the good is the most significant cost driver, at $2.5bn last year. Despite such costs, the profits of the company have been growing consistently as well, which is a healthy sign.
Balance Sheet
Source: Venture Corporation Annual Report FY2018
The current ratio is almost 3 times, which shows that the business should be able to deal with their short-term liquidity well. Current assets seem evenly split between cash and receivables. With $2mn in debt, the company holds very little debt. This is because a lot of debt had been paid off throughout the year. Hence, I won't share about leverage and coverage ratios here.
Cashflows
Source: Venture Corporation Annual Report FY2018
Operating cash flows were actually weakened by the working capital conditions of the company. In fact, the increase in inventories and payables had reduced cash flows by $150mn. This is means that there is more cash tied up by holding on more inventory, and it also means that more cash was used up to pay suppliers.
As mentioned, the business is rather capital intensive, with $60mn spent on the purchase of plant property and equipment. This figure is about 25% of its cash flow from operating activities. Hence, free cash flow is quite high at around $200mn.
This high free cash flow allowed the company to pay out almost $230mn in dividends. This leaves the business with a payout ratio of almost 0.6. Although this figure is slightly high, I do believe that a lot of the company does possess strong cash flows. Moreover, with little debt, there will be more cash available for shareholders.
Business Profile
Venture Corporation is a global provider of technology products and solutions. It is best known for its superior capabilities in Original Design Manufacturing (ODM) and in providing high-mix, high-value and complex manufacturing. Its technology ecosystems span four segments, namely, Advanced Industrials, Consumer/Lifestyle, Financial Technology, and Life Science & Instrumentation
SWOT Analysis
Strength: Venture has a unique defensible ecosystem that competitors might find hard to copy. Additionally, they have strong coveted partnerships with other technology companies in various attractive end-markets which allows the firm to command higher margins.
Opportunities: The business is looking to bring in new products and expanding into non-traditional markets. Moreover, improvement in US-China trade relations may grant newer business opportunities ahead.
Weakness: Venture has broad exposure to markets in the US, EU, and Asia. A global slowdown could impact Venture due to its vulnerability to business cycles. Additionally, the business is quite capital intensive, with cashflows being affected heavily by working capital conditions and capital expenditures.
Threats: The company could be affected by political instability in Europe due to the adoption of restrictive trade policies by the US. Furthermore, due to large exposure to the US currency, a weakened USD against SGD and low-interest rates conditions could affect Venture significantly.
Financials
Income Statment
Source: Venture Corporation Annual Report FY2018
As a whole, revenue has been increasing over the past few years. It increased from $2.5bn 5 years ago, to $3.5bn in 2018. Such consistent and significant growth in revenue could indicate that there is a growing demand for their services and Venture is able to fulfill them. Unsurprisingly, the cost of producing the good is the most significant cost driver, at $2.5bn last year. Despite such costs, the profits of the company have been growing consistently as well, which is a healthy sign.
Balance Sheet
Source: Venture Corporation Annual Report FY2018
The current ratio is almost 3 times, which shows that the business should be able to deal with their short-term liquidity well. Current assets seem evenly split between cash and receivables. With $2mn in debt, the company holds very little debt. This is because a lot of debt had been paid off throughout the year. Hence, I won't share about leverage and coverage ratios here.
Cashflows
Source: Venture Corporation Annual Report FY2018
Operating cash flows were actually weakened by the working capital conditions of the company. In fact, the increase in inventories and payables had reduced cash flows by $150mn. This is means that there is more cash tied up by holding on more inventory, and it also means that more cash was used up to pay suppliers.
As mentioned, the business is rather capital intensive, with $60mn spent on the purchase of plant property and equipment. This figure is about 25% of its cash flow from operating activities. Hence, free cash flow is quite high at around $200mn.
This high free cash flow allowed the company to pay out almost $230mn in dividends. This leaves the business with a payout ratio of almost 0.6. Although this figure is slightly high, I do believe that a lot of the company does possess strong cash flows. Moreover, with little debt, there will be more cash available for shareholders.