Venture's Q4 gains threatened by waning customer loyalty

Even as it acquired new customers.

According to CIMB, Venture’s shortfall in  as a non-event as investors are, like us, looking forward to a better 2013.

Here's more from CIMB:

Venture also remains one of the few tech companies that offer sustainable attractive dividend yield.

3Q12 core net profit was 10% below consensus and 12% short of our estimate due to lower-than-expected sales and margin. 9M12 profit was 68% of consensus and 65% of our FY12 estimate.

Our target price rises as we roll it over to end-13, still applying 14x P/E (5-year average). We view the resumption of earnings growth as a catalyst.

3Q12 sales were relatively flat qoq but improved 4% yoy to S$609m, 5% below our expectations due to weaker-than-expected sales for three out of its five product segments.

EBITDA margin contracted 40bp yoy but improved 20bp qoq to 7% in 3Q12. The qoq improvement resulted from a better mix. Because of the lower margin, pretax profit slipped 3% and core net profit fell 4% yoy despite higher sales.

Nevertheless, Venture continued to generate positive FCF during the quarter through a faster cash cycle. It ended the quarter with S$264m net cash, up from S$227m a quarter ago.

Management sounded cautious during the results briefing, citing the continued weak end demand that most of its customers expect. This prompted us to lower our 4Q12 expectations.

On a more positive note, it has acquired a few new customers. This, together with ongoing prototyping and new product introduction programmes, underpins our belief that growth will resume for Venture in 2013.