CGS International

May 14, 2025

Venture Corporation: Navigating a Challenging FY25F with Strategic Resilience

1Q25 Performance Overview: Revenue Dip Offset by Robust Profit Margins

• Venture Corporation’s 1Q25 revenue experienced a decline of 7% quarter-over-quarter (qoq) and 8% year-over-year (yoy), landing at S\$617 million. [[1]]
• This figure aligns with 23% of both CGS International’s and Bloomberg consensus’ full-year forecasts, deeming the revenue performance in line with expectations. [[1]]
• Net profit for 1Q25 reached S\$56 million, marking an 8% decrease qoq and a 7% decrease yoy. [[1]]
• This places the net profit at 25% of CGS International’s and 23% of Bloomberg consensus’ full-year forecasts, considered in line with or slightly below expectations. [[1]]
• Despite the revenue decline, Venture Corporation maintained a robust net profit margin of 9.1% in 1Q25. [[1]]
• This was achieved through a continued emphasis on cost efficiency and the delivery of high-value solutions via differentiated capabilities. [[1]]
• As of the end of March 2025, the net asset value per share stood at S\$10.11. [[1]]

Demand Factors and R&D Impact

• The revenue decrease is attributed to reduced demand from a major customer (contributing over 10% of FY24 revenue) within the Lifestyle Consumer technology sector. [[1]]
• Venture Corporation’s R&D design innovation enhanced the reliability and longevity of this customer’s key products. [[1]]
• This improvement led to a lower product replacement rate, impacting revenue. [[1]]

Tariff Uncertainty and Mitigation Strategies

• Management indicates that the prevailing tariff situation introduces substantial uncertainty into the global economic landscape. [[2]]
• There is a lack of clear visibility regarding the tariff environment over the next 12 months. [[2]]
• Venture is proactively developing competitive solutions for its clientele and partners. [[2]]
• These solutions aim to alleviate any tariff-related effects using its production facilities in the US, Singapore, and Malaysia. [[2]]
• The management anticipates potential opportunities to grow market share across at least three or four of the technology domains in which the group is active in the coming years. [[2]]

Investment Recommendation: Hold with Revised Target Price

• CGS International has reiterated a Hold recommendation on Venture Corporation. [[2]]
• This is based on a total potential return of 3.99%. [[2]]
• The target price has been adjusted upwards from S\$10.13 to S\$10.97. [[2]]
• This revision reflects a shift to 13.1x FY26 P/E, which is 0.5 standard deviations below its 20-year (FY06-25) average P/E. [[2]]
• The rationale for using 0.5 standard deviations below the average is to balance potential improvements in qoq net profit in 2Q25F with the still-cautious FY25F demand outlook for the group. [[2]]
• Previously, the P/E multiple was pegged at 12.1x, reflecting the EPS decline during the Global Financial Crisis spanning FY07-09 when Venture’s average P/E multiple de-rated to 12.1x. [[2]]
• The share price is expected to find support at its end-March 25 net asset value per share of S\$10.11. [[3]]

Upside and Downside Risks

Upside Risks: [[3]]

• New product launches by customers. [[3]]
• Better-than-expected revenue opportunities as businesses diversify production from China to Malaysia. [[3]]

Downside Risks: [[3]]

• Potential supply chain disruptions affecting the availability of parts and components. [[3]]
• A worsening global economic outlook, potentially reducing orders from customers. [[3]]
• Further cuts to healthcare spending and grants to universities in the US, which could lower demand from its life science customers. [[3]]

Key Financial Metrics and Ratios

• Current Price: S\$11.27 [[3]]
• Target Price: S\$10.97 [[3]]
• Previous Target: S\$10.13 [[3]]
• Up/downside: -2.7% [[3]]
• CGSI / Consensus: -10.1% [[3]]
• Market Cap: US\$2,497m or S\$3,242m [[3]]
• Average daily turnover: US\$6.43m or S\$8.55m [[3]]
• Current shares o/s: 289.1m [[3]]
• Free float: 92.9% [[3]]

Major Shareholders

• Wong Ngit Liong: 7.1% [[3]]
• Schroders: 6.8% [[3]]

Analyst Contact

• William TNG, CFA [[3]]
• T (65) 6210 8676 [[3]]
• E [email protected] [[3]]

Financial Summary and Forecasts

1Q25 Results Summary

Peer Comparison

ESG Overview

• Venture Corporation maintains a C+ ESG Combined Score from Refinitiv from FY20 to FY22. [[3]]
• The company was recognized as Runner-up in the Most Transparent Company (Technology Category) award by the Securities Investors Association (Singapore) (SIAS) in 2022. [[3]]

ESG Factors to Watch

Customer Concentration Risk: [[3]]

• Venture faces customer concentration risk due to non-disclosure agreements, making it difficult to name major customers. [[3]]
• Based on the FY23 annual report, two major customers each account for over 10% of its revenue (FY22: 1 customer). [[3]]
• The loss of these customers could adversely affect Venture, although it is not assumed in current forecasts. [[3]]

ESG Highlights: [[3]]

• Channel checks indicate Venture is involved in manufacturing e-cigarettes. [[4]]
• While the valuation methodology does not discount for e-cigarette involvement, some investors may be restricted from investing in companies with exposure to smoking. [[4]]

Trends: [[4]]

• Venture’s primary energy source is electricity from the grid. [[4]]
• Carbon emission intensity by revenue increased from 25.17 TCO2e/S\$m in 2022 to 26.77 TCO2e/S\$m in 2023. [[4]]
• Measures to reduce electricity usage include replacing traditional lighting with LED and older air-conditioning systems with energy-efficient inverter-type units. [[4]]

Key Balance Sheet Items

Key Ratios and Drivers