2023: Results In Line With Expectations; Expect A Better 2H24 Than 1H24
2023 earnings of S$270m (-27% yoy) are in line with our forecasts. 2023 revenue fell 22% yoy due to soft customer demand and ongoing inventory destocking. Based on VMS customers’ feedback, the demand schedule is expected to be stronger in 2H24 vs 1H24. VMS is actively investing to grow further in existing and new areas including hyperscale data centres and semiconductor domains. Maintain BUY and target price of S$16.37.
RESULTS
• Results in line with expectations. Venture Corporation’s (VMS) 2023 earnings of S$270m (-27% yoy) were in line with expectations, forming 101% of our full-year estimate. Revenue fell 22% yoy against a high base last year due to demand softening across most of its technology domains and customers’ inventory destocking. 2023 net margin fell 0.7ppt to 8.9%, mainly due to higher tax, inflationary cost pressure and lower operating leverage as revenue declined
• Expect stronger 2H24 vs 1H24. Based on customers’ feedback, VMS expects that the demand schedule will be stronger in 2H24 vs 1H24. To recap, VMS was still coming off the high base quarter in 1Q23 where it recorded earnings of S$74m, before normalising in 2Q23- 4Q23 with earnings of S$63-67m.
• VMS is actively investing and building its manufacturing, engineering and total business excellence to grow further in the Life Sciences, Test & Measurement Instrumentation, Hyperscale Data Centres, Semiconductor Equipment, Advanced Industrial, Networking & Communications and Luxury Lifestyle & Wellness domains. This will deepen collaboration with many of VMS’s class-leading customers.
• VMS is expanding its participation in customers’ products by providing more services across the design, sourcing and supply chain management process. It is also creating advanced modules that help improve product performance, generating outstanding value for its customers. VMS is also mitigating geopolitical risks for both existing and prospective customers through innovative redesign and supply chain solutions.
