Venture Corporation: Margin Pressures Amid Global Uncertainties
Maybank Research Pte. Ltd. | April 9, 2025
Venture Faces Margin Downside from Tariffs
Venture Corporation (VMS SP) is an electronics manufacturing services and ODM provider with a global footprint. The research report from Maybank Investment Bank highlights the challenges the company is facing due to the ongoing trade tensions and potential global economic slowdown.
Tariff Troubles
Around 25% of Venture’s revenue is exposed to the US market, which could be negatively impacted by the new tariffs.
Venture may have to renegotiate contracts with customers, leading to margin compression as it is forced to absorb some of the increased costs.
Customers may also shift production to suppliers within the US to avoid the tariffs, resulting in Venture losing business.
Demand Slowdown Ahead
The report expects orders from customers around the world to slow down and product launches to be delayed due to the uncertain economic environment.
This will lead to a decrease in Venture’s revenue and lower operating leverage, putting further pressure on net margins.
Revised Financial Forecasts
Maybank has reduced its FY25/26 NPAT forecasts for Venture by around 24%/23%, resulting in a lower price target of SGD9.40.
Key changes to Maybank’s estimates:
FY25E revenue down 16.7% to SGD2,325.5 million
FY25E core net profit down 23.5% to SGD183.2 million
FY26E revenue down 16.7% to SGD2,441.8 million
FY26E core net profit down 23.1% to SGD196.7 million
Dividends Provide Support
Despite the margin pressures, Venture offers an attractive dividend yield of around 7%.
The company’s strong balance sheet and active share buyback program provide additional support for the share price.
Prefer Frencken Over Venture
Maybank prefers Frencken (FRKN SP, BUY, SGD1.15) over Venture due to its brighter outlook.
In conclusion, Venture is facing significant headwinds from the trade tensions and global economic uncertainty. While the company’s dividends provide some support, Maybank has reduced its financial forecasts and price target for Venture, preferring Frencken as a better investment option in the current environment.
