Depressing Q3 gains loom over Venture amid waning customer loyalty

Low single-digit revenues are expected.

According to OCBC, Venture Corp (VMS) is expected to report a set of muted 3Q12 results due out on 8 Nov. This is attributed to continued weakness in sentiment amongst its key customers, based on our channel checks and update from the group.

Here's more from OCBC:

We believe that business confidence has been undermined by uncertainties in the macroeconomic environment, thus impacting the volume ramp up from VMS’s key customers. We forecast VMS to deliver flat to low single-digit revenue and PATMI growth on a QoQ basis for its 3Q12 results.

General manufacturing data have also painted a dour scenario, which highlights the prevailing challenging conditions.

Nevertheless, we opine that VMS’s financial performance could pick up in 4Q12, with momentum flowing into FY13, underpinned by the launch of new programmes with both existing and new customers.

New electronics products typically have an opening window of higher margins upon launch and we expect VMS to benefit positively on this, especially in FY13.

One growth driver for VMS is likely to come from Oclaro Inc., which has signed an agreement to transfer its final assembly and test operations from Shenzhen to VMS’s Malaysia facility over the next three years.

Qualification by customers is currently taking place. We believe that maiden contribution would occur in 4Q12, with more significant ramp up in production in FY13.