Venture's net profit to slump 19% to S$33.7m: DBS

Sales are also expected to drop 9% to S$571m in 2Q12.

According to DBS, "We expect 2Q12 sales of S$571m (-9% y-oy, -1% q-o-q) and net profit of S$33.7m (-19% y-o-y, -3% qo-q). Overall business was light in 2Q12, extended macro weakness tempered demand in the market place. Despite new product launches, business activities at Venture remained flatline. We believe margin rebound would be difficult to materialize in this quarter of muted sales."

Here's more from DBS:

H2 rebound would also be softer than expected. Outlook is cautious across all divisions except for Retail Store Solutions/Industrial where new RSS systems were launched recently and Industrial water/power metering products continues to show strength. These aside, we believe overall volume growth in H2 would still be muted amid macro challenges. Hence, we have cut FY12F/13F earnings by 11% and 15% respectively on lower sales and margin assumptions

Balance sheet would stay strong but expect inventory to rise. Venture is building stock for higher run-rate in 2H and new customer Oclaro which is expected to begin production transfer from Shenzhen to Penang late this year. Nevertheless, we expect cashflow generation to remain strong and sufficient to support annual dividend payment of S$150m.