Leading manufacturing services player Venture Corporation V03 has a new substantial shareholder. On May 16, UK-based fund manager Silchester International Investors acquired 357,900 shares on the open market for just over $14 each share, bringing its total interest to about 14.74 million, equivalent to a 5.08% stake, making it the fourth largest shareholder of Venture Corp. Before the transaction, Silchester already owned a 4.96% stake.
Besides Venture, Silchester is a substantial shareholder in ComfortDelGro C52 Corp, another Singapore blue chip. According to the land transport operator’s most recent annual report, as at March 1, Silchester had a stake of 152.75 million shares, equivalent to 7.05%, making it the largest shareholder of ComfortDelGro. Silchester last bought on Jan 29, paying $1.39 each for 1.97 million shares on the open market.
On the other hand, another fund, which is also a substantial shareholder of Venture, has divested a big chunk of the shares. Ameriprise Financial on May 23 sold 131,800 shares at $14.1 each, leaving it with a balance of 20.21 million shares, equivalent to 6.968%, down from 7.014%. The selling on May 23 is in contrast with its earlier acquisition on May 14 when it purchased 1,900 shares at $13.9 each. According to the most recent Bloomberg data, Ameriprise is the second-largest shareholder of Venture, with longtime chairman Wong Ngit Liong still the largest shareholder with a stake of around 20.7 million shares, equivalent to 7.13%. The Vanguard Group is the third-largest shareholder with a stake of 5.97%.
While the substantial shareholders are trading their shares, Venture has continued with its own buybacks. Under the previous mandate, Venture bought back a total of 927,100 shares. On May 7, under a recently renewed mandate, the company bought back 100,000 shares at $13.47 each.
On May 3, Venture Corp reported a weaker-than-expected 1QFY2024 ended March bottom line. Earnings were down 18.3% y-o-y to $60.1 million on the back of an 18.9% drop in revenue to $666.7 million.
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In its update presentation, Venture attributes the softer numbers to overall weaker demand. The life sciences and certain segments in network and communications, in particular, were still seeing destocking carried over into 1QFY2024.
Venture says it is drawing on its capabilities in manufacturing, research and design to not just grow with its customers but to also expand its market share with these customers. Venture says it is bringing onboard new customers in medical technology and lifestyle sectors, as well as what it calls “promising” technology domains. “Based on customers’ feedback, we are starting to see demand strengthening in several technology domains for the rest of 2024,” says Venture.
Analysts tend to agree with Venture’s view as they note that despite overall weaker top and bottom lines, the company was able to maintain net margins at 9% for 1QFY2024 versus 9.1% in 4QFY2023. Meanwhile, Venture’s already sizeable net cash continues to grow to $1.19 billion or around a third of its market cap.
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“With inventory destocking coming to an end, coupled with improving demand for most of the domains, the group expects a better 2HFY2024 versus 1HFY2024 and a stronger 2QFY2024 as compared to 1QFY2024,” writes DBS Group Research’s Lim Lee Keng in her May 6 report.
In his May 5 note, Jarick Seet of Maybank Securities has kept his “buy” call and $15.80 target price as Venture is expected to enjoy a gradual recovery from FY2025 despite the weak start to the year. “With a yield of 5.3%, a strong balance sheet and an active share-buyback programme, we believe that Venture will likely be a safe haven for investors,” he says.
“While 1QFY2024 may have been soft, we believe this is widely expected and the company’s signal of sequential revenue improvement should help support the share price. The downside risk is also likely mitigated with the company’s ongoing share buyback programme,” says Luis Hilado of Citi Research, who has kept his “buy” call and $15.70 target price.
