Venture Corporation Limited (SGX: V03) is a contract manufacturer for the electronic components industry as well as a global provider of technology solutions, products, and services. The group comprises more than 30 companies with global clusters in Southeast Asia, Northeast Asia, America, and Europe, and it employs over 12,000 people worldwide.
Venture is considered a blue-chip company as it has a long operating history and an excellent track record, and it’s also a component of the Straits Times Index (SGX: ^STI). While the company has been in the news of late as the electronics industry is once again experiencing a boom, the reality is that Venture has been toiling all these years in relative obscurity — until recently.
While digging deeper into the company’s numbers and history, I was amazed to find that the group had demonstrated stability and consistency throughout the last 10 years. Even when the electronics industry was not at the forefront of growth, with the new Internet of Things and artificial intelligence push, Venture still managed to generate steady profit and pay a consistent dividend.
Let’s dive into three important metrics to evaluate the company: revenue and net profit, free cash flow, and dividends.
1. Revenue and net profit
While the company’s compound annual growth rate (CAGR) over nine years is just 0.2% for revenue, it’s important to note that revenue has remained fairly stable over the years. This shows a consistent and steady demand for Venture’s products and services. Net profit, though, has grown at a more impressive CAGR of 11.1% over the same nine years, implying that the group has become more efficient in controlling expenses and in squeezing out more profit per dollar of revenue.
Investors should note that Venture’s net margins have also hit their highest level in 10 years in the last two years (2017 and 2018), at 9.3% and 10.6%. This was no doubt boosted by the surge in demand due to the electronics boom, and the trend may continue as Venture takes advantage of the demand surge to boost its net profit.
2. Free cash flow
Free cash flow (FCF) has shown a very consistent pattern over the last 10 years, with every single year registering positive FCF since 2009. This is a very impressive trend as the electronics industry is known to be cyclical, and Venture’s ability to churn out FCF every single year despite this cyclicality should be lauded as a particularly admirable feat.
3. Dividend history
Venture is also well-known for its consistent dividend payments, and the total dividend per share has hovered between S$0.50 and SS$0.55 per year from 2009 to 2016. It was only in 2017 that the total dividend was finally raised to S$0.60, as Venture experienced a significant jump in year-on-year net profit.
For FY 2018, Venture paid its first interim dividend of S$0.20 and also raised its full-year dividend further, to S$0.70. At the last traded share price of S$14.70, the trailing dividend yield was 4.8%.
Room for continued growth
By looking more closely at Venture’s 10-year financials and metrics, investors can get a better sense of how much the group has grown over the years — and how consistent it has been in generating FCF and paying dividends.
I believe the group has room for continued growth, as its wide range of products and services allows it to tap into continued strong demand for electronic solutions. Its dividend policy has also improved, as the group now pays twice-yearly dividends, and investors should definitely look to adding this solid blue-chip stock to their investment portfolios.
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The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.
Motley Fool Singapore 2019