Are Venture Corp Shares a Buy After Latest FY2022 Earnings?
March 1, 2023
Earnings season in Singapore is nearly over as most large companies in the Straits Times Index (STI) have reported numbers for FY2022.
Yet one of bigger technology stocks, that’s also part of the STI, is Venture Corporation Ltd (SGX: V03). The company reported its Q4 2022 and FY2022 numbers last Friday (24 February) after the market close in Singapore.
Venture is perhaps a less well-known name among Singapore investors, given it tends to operate outside of the limelight. But the firm’s goods are an integral part of many everyday devices.
The technology services, products, and solutions provider counts companies, operating in life sciences to advanced industrial and financial technology, as clients of theirs.
With a lot of its manufacturing capabilities located in Malaysia, it had seen a strong rebound throughout 2022. Did that continue with its latest earnings? And are Venture shares now a buy for investors?
Revenue and profits continue to recover
Overall, for FY2022 Venture posted revenue of S$3.86 billion, up 24.3% year on-year from FY2021.
Meanwhile, net profit for FY2022 came in at S$396 million, up 18.4% year-on-year. Net profit growth came in materially lower on the back of a higher effective tax rate in FY2022.
That meant that Venture saw its net margin contract slightly to 9.6% in FY2022, down 40 basis points (bps) from the 10.0% net margin in FY2021.
Zooming into Q4 2022, Venture recorded revenue of S$1.05 billion, up 15.4% year-on-year from the same period in 2021.
Because of a substantially higher income tax expense – which was up 28.5% year-on-year – net profit of S$98.0 million for the quarter was only up 3.5% year-on-year.
Getting back to normal
Despite that, though, Venture’s business is getting back to the performance it saw pre-pandemic. A second consecutive quarter of +S$1 billion in revenue was attributed to robust demand in several technology domains.
Indeed, management noted in its earnings release that Venture’s strongest revenue growth during Q4 2022 came from the Instrumentation, Test & Measurement, Healthcare & Wellness, and Life Science & Genomics technology domains.
Additionally, Venture also managed to reduce its inventory levels from S$1.25 billion at the end of September 2022 to S$1.06 billion as of the end of December 2022.
Cash flow generation was also robust with free cash flow for FY2022 coming in at S$236 million.
Dividend tech stock yielding over 4%
While Venture continues to be exposed to all the right structural trends in its specialty areas, dividend investors might also like the firm given its dependable track record of paying a dividend (see below).
Source: Venture Corporation’s Q4 2022 and FY2022 earnings presentation
Venture declared a final dividend per share (DPS) for FY2022 of 50 Singapore cents. While that was stable from FY2021, the company does have a comfortable cash position of cash position of S$812.6 million.
Additionally, Venture has managed to grow its dividend per share at a compound annual growth rate (CAGR) of 7% between 2016-2022.
Meanwhile, its FY2022 DPS of 75 Singapore cents is well covered by earnings per share (EPS) of S$1.26 in FY2022 – meaning Venture has a comfortable dividend payout ratio of just under 60%.
And with a cash position that’s currently equal to about 16% of Venture’s current market cap of S$5.03 billion, the company has the headroom to raise it in the coming years.
Venture shares fell nearly 5% after its earnings release (perhaps on cautious tone that management struck on the earnings call).
However, with a dividend yield of over 4%, and potential to keep growing, Venture shares look attractive for long-term investors.
Singapore tech stock with structural tailwinds
Venture rounded out a strong FY2022 with earnings that looked to get back to the pre-pandemic days.
One thing to note, for shareholders, is that post-earnings (on 28 February) Venture’s CFO William Ng announced his resignation for personal reasons.
Mr Ng was only appointed to the CFO position in April of 2022, meaning he will have served only a little over the year by the time he departs.
Overall, though, Venture continues to be a strong company with the structural tailwinds required to keep growing both its earnings and dividend over the long term.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of Venture Corporation Ltd.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.