(July 29): The world’s largest asset manager, BlackRock, has ceased to be a substantial shareholder in electronics manufacturer Venture Corp after divesting 525,516 shares on July 22. Via its subsidiary PNC Financial Services Group, BlackRock now holds 14,365,540 shares, or 4.98% of total shares, down from 14,891,056 shares (5.16%).
Prior to that, BlackRock had divested and reacquired its stake in Venture Corp in a matter of days. On July 17, it sold 221,328 shares, leaving it with a 4.97% stake in the company. On July 19, it bought back 525,394 shares, giving it a 5.16% stake. The filings to the stock exchange did not disclose the price at which the shares were transacted.
On July 19, Venture bought back 40,000 of its own shares from the market at $14.89 each, for a total of $596,889.78. Typically, companies buy back shares as a way of signalling their shares are undervalued.
Venture, the blue-chip electronics contract manufacturer listed on the Singapore Exchange, is one of the leading global providers of technology services, products and solutions, including marketing research, design and development, product and process engineering, design for manufacturability, supply chain management, as well as product refurbishment and technical support across a widely diversified range of high-mix, high-value and complex products. Headquartered in Singapore, the group comprises more than 30 companies with global clusters in Southeast Asia, Northeast Asia, the US and Europe and employs over 12,000 people worldwide.
However, investors have been worried that Venture, despite its size, would be hit by the slowing economy, especially in the electronics manufacturing sector.
Data from Enterprise Singapore showed that Singapore’s exports fell by double digits for the fourth straight month, with shipments in the key electronics sector sinking by nearly a third. Non-oil domestic exports slumped 17.3% in June, compared with a year ago, following a downward revision to 16.3% in May.
Still, Venture recorded revenues of $928.8 million and net profit of $90.9 million for the quarter ended March 31. Net profit grew 8.6% y-o-y while earnings per share improved 35.1 cents as at 1Q2019.
Analysts have maintained their “buy” call on Venture, with Maybank Kim Eng saying its multiple levers of growth appear intact. It points out that Venture is a beneficiary of the US-China trade war, as around 85% of production is outside China.
“However, 2Q2019 may be a miss amid customers’ product transitions, and a potential share price fall may provide an even more attractive entry,” its analyst Lai Gene Lih says. “[Not only that,] Venture has a track record of consistently winning new customers, and it believes contributions from new customers will still grow in 2019. New customers won as a result of the trade war should contribute more meaningfully in the next one to two years, as time is needed to launch new products.”
DBS Group Research also maintained its “buy” call, despite expecting a weaker 2Q2019 and cutting Venture’s earnings forecasts by 6% to 8% for FY2019F/FY2020F.
Despite the cut in earnings, DBS said it was maintaining its call on Venture for its strong R&D, entrenched position in a wide range of segments, strong financials and a strong tailwind from the trade war impact.
“Our earnings cut is mainly premised on the prolonged trade war uncertainty and the widening of the product transition period for some of its customers. We expect pricing pressure to persist in FY2019. Margins are hit and visibility remains low as customers are less willing to commit to orders in view of the cloudy outlook. Potential additional tariffs and the possibility of an all-out technology war between the US and China will have a more detrimental impact.”
Better clarity is expected when Venture reports its 2Q financial performance on Aug 8. Year to date, Venture shares have gained 14.68% to $15.78 on July 24. This values the company at $4.5 billion. At this level, the company is trading at 12.51 times historical earnings and offers a yield of 4.41%.
