Venture Corporation: Weathering the Trade War Storm

CGS International | April 8, 2025
The tech manufacturing landscape has been rocked by the escalating trade tensions between the US and China, and Venture Corporation finds itself navigating these turbulent waters. This comprehensive analysis delves into the company’s prospects amidst the global economic uncertainties.

US-China Trade War Escalates

The report highlights the recent tit-for-tat tariff increases between the US and China, with the US imposing a 10% baseline tariff on all imports and a 34% increase on goods from China, bringing the total tariffs on Chinese exports to 54%. In retaliation, China has announced reciprocal 34% tariffs on all US imports.
Malaysia, where 82% of Venture’s production capacity is based, has been hit with a 24% tariff by the US.
The escalating trade war is likely to have a negative impact on Venture’s FY25 earnings, as the company had already warned of an uncertain short-term business outlook in its FY24 results.

Lessons from the 2007-2009 Recession

The report draws parallels between the current situation and the 2007-2009 US recession, which saw Venture experience declines in both revenue and net profit for FY08 and FY09.
The analysts believe Venture’s FY25-27 revenue outlook could be indirectly affected by the trade war, reducing their revenue forecasts by 7.4-13.9% and lowering FY25-27 core EPS by 17.1-18.3%.
FY25 core EPS is expected to fall by 10% year-over-year, marking the third consecutive year of decline, before growth resumes as the company adapts to the new business environment.

Downgrade to Hold

Given the uncertain net profit outlook caused by the trade war escalation, the analysts have revised their valuation methodology for Venture Corporation.
They now value the company at 12.1x their reduced FY26 EPS forecast, leading to a lower target price of S$10.13.
The report downgrades the recommendation from Add to Hold, citing the 6.89% dividend yield and the company’s strong S$1.32 billion net-cash balance sheet as of end-December 2024.

Risks and Opportunities

The report outlines both upside and downside risks for Venture Corporation:
Upside Risks:
New product launches by customers
Better-than-expected revenue opportunities as companies diversify production from China to Malaysia
Downside Risks:
Potential supply chain disruptions affecting parts and component availability
Worsening global economic outlook, leading to reduced orders from customers

Peer Comparison

The report includes a comparative analysis of Venture Corporation against its US-listed peers, highlighting key financial metrics such as P/E, P/BV, and ROE.
Company Bloomberg Ticker Price Target Price Market Cap P/E (CY25F) P/BV (CY25F) Recurring ROE (CY25F)
Venture Corporation VMS SP S$10.88 S$10.13 US$2,325m 11.7x 1.07x 9.2%
Benchmark Electronics BHE US US$32.66 N/A US$1,179m 13.6x 1.04x 7.8%
Celestica Inc CLS US US$66.15 N/A US$7,623m 13.6x 3.46x 25.1%
Flextronics International FLEX US US$26.68 N/A US$10,221m 9.5x 2.01x 22.9%
Jabil Circuit JBL US US$116.90 N/A US$12,761m 12.3x 8.90x 65.8%
Plexus Corp PLXS US US$112.20 N/A US$3,035m 16.2x 2.08x N/A
Sanmina-SCI Corp SANM US US$67.30 N/A US$3,656m 11.6x 1.55x 14.2%