Venture Q2 profits jumped 40.2% to $97.91m

It thanked its continued R&D and lower operating costs.

For the second quarter of 2018, Venture Corporation’s profits jumped 40.2% to $97.91m from $69.84m last year. Revenue dipped 6% to $952.28m from $1.01b.

Management attributed the growth to continued R&D, and achievement of lower costs at various operating levels, OCBC Investment Research noted.

“We deem this to be within expectations, given that Q2 typically forms ~22.6% of the group’s full-year core PATMI,” said OCBC Investment Research analyst Joseph Ng.

Whilst the group’s inventory level has been growing ($727.2m in 2Q2018), this could be attributed to management’s proactive decision to carry more critical components in light of tighter component supply conditions, following consultations with various customers.

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“On the impact of trade-war tensions, management shared that not only is less than 2% of the group’s revenue affected by the HS code tariffs to the US, the group has also thus far been able to work out certain strategies with partners to mitigate this exposure,” Ng said.

“Furthermore, the current tensions have also led to increased business from both new and existing customers; a number of them have plants in China but wish to leverage Venture’s production facilities in Malaysia and Singapore,” the analyst added.

Consequently, OCBC Investment Research said Venture still has the ability to deliver net profit margins of 9-10%. “The group’s growing R&D expenses typically translate into firmer margins, whilst the group’s tight customer collaboration should help to create longer-term value,” Ng said.

Venture also declared its inaugural interim dividend of 20 cents per share since listing.