Here’s why the strong greenback is a double-edged sword for Venture

Customer demand will take a hit.

The strengthening US dollar brings both good and bad news for Singapore-listed Venture Corporation. Although its bottomline will be boosted by the currency’s appreciation, analysts warn that customer demand might take a hit if the USD continues to strengthen against regional currencies.

According to Maybank Kim Eng, Venture is a net beneficiary of the stronger greenback because its revenue and direct costs are all denominated in USD.

“If USD gains 10% against SGD, we expect Venture to benefit on paper. A 10% boost to its topline in FY16 should flow straight to its bottom line, all else being equal,” said the report.

However, the strong greenback might erode the price competitiveness and dampen demand of Venture’s customers.

“However, customer demand may be dampened by further USD strength as Venture’s customers are overwhelmingly American. A strong USD will affect their price competitiveness in the global marketplace and curtail consumption,” Maybank Kim Eng noted.

Maybank Kim Eng believes that Venture will not be impacted by interest rate hikes, even if they come four in a row. This is because it has low debt, while its cash far outweighs its short-term debt.