3 threats that could derail Venture’s stellar performance

Disruption of orders could be one of them, an analyst says.

Maybank Kim Eng analyst Gregory Yap said Venture Corp’s posted earnings for 2Q16 posed downsides, one of which is the possibility of discontinued orders due to the acquisition of its customers by others.

“If not for temporary M&A-related order disruptions in Printing & Imaging and Computer Peripherals, growth would have been stronger. Management plans to improve revenue mix disclosures, which should lead to better valuations,” Yap said.

The global electronics provider has posted a profit of $43.4 million this month, mostly driven by the businesses with more value-creation potential such as Test & Measurement, Life Sciences, and Networking.

The recorded net profit is a 20.3% leap from the same period a year earlier.

However, Yap deemed that another threat for the company is USD strength, saying that it “may erode competitiveness of Venture’s customers in the global marketplace, lowering orders for Venture.”

The analyst also noted that the increased customer demand to hold more inventory would tie down cash that could be used to pay more dividends.

Still, Yap believes the growth’s drawbacks has given Venture a room for improvement.

“With room for margins to further improve, the stock’s re-rating that started in early 2016 can extend further; maintain our BUY call with a street-high TP of SGD9.75,” Yap said.