Why Venture's networking & communications segment deserves the profit limelight

It's currently 16.7% of revenue.

According to OCBC, Semiconductor Industry Association (SIA) reported last week that sales in Jul-14 grew 14.9%, 11.2% and 8.1% YoY in Europe, Asia Pacific and Americas, respectively.

OCBC cited IDC, saying that enterprise wireless local area network (WLAN) market grew 7.7% YoY in 2Q14 while worldwide Ethernet switch (ES) market increased 6.2%, led by growth of 21% in Asia Pacific ex Japan and 13.9% in Western Europe. 

Here's more from OCBC:

Correspondingly, Venture Corp (VMS) reported 6.5% YoY growth in its 2Q14 Networking & Communications (N&C) segment revenue to S$100.2m. We believe the growth in cloud deployments and worldwide network demand from datacentres will continue to drive investments in these two markets into FY15.

With VMS’ N&C segment making up ~16.7% and ~16.3% of its 2QFY14 and 1HFY14’s total revenue, respectively, we think VMS is poised to capture the growth expected in this segment.

Markit reported Eurozone’s Manufacturing PMI of 50.7 (Jul-14: 51.8) is at its 13-month low in Aug-14, as companies faced slower increases in both total new orders and new export business. According to Institute for Supply Management (ISM), U.S. Aug-14 PMI increased 1.9 ppt in Jul-14 to 59.0%, which is the highest since recording 59.1% in Mar-11, indicating continued expansion in manufacturing.

Markit’s Aug-14 Asia Sector PMI also showed increased business activity, led by technological equipment producers, who saw the strongest output expansion in seven months. Based on our estimates as at its 2QFY14 results, with ~50%, ~10% and ~40% of VMS’ customers to be based in U.S., Europe and Asia Pacific, respectively, we believe the positive data points in U.S. and Asia would offset Eurozone’s decline and benefit VMS. We expect the positive outlook to sustain for the remaining 2H14.