-
SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST
CERTIFICATIONS
Co. Reg No: 198700034E MICA (P) : 099/03/2012
Singapore
7 January 2014 Rating Change
Venture Corporation Stronger Drivers Ahead
Outlook brightening, upgrade to BUY. We upgrade Venture
Corporation to BUY from HOLD in anticipation of an earnings
recovery this year, as well as renewed interest in the stock on
account of this and the sustainable dividend yield of almost 7%. At
14x P/E, the stock currently trades at below the 18-20x P/Es of its
key comparables, and our new target price of SGD8.70 (16x FY14E
EPS) teases 14% upside. Almost all its major business segments are
expected to enjoy stable revenue growth in 2014E, with the Test
& Measurement and Retail Store Solutions divisions possibly
riding a cyclical upturn. Come 2015, a hot new product could be
added into the mix, namely, 3D printer, where the valuations of the
key industry players have reached heady levels of 50-70x earnings.
Earnings poised to recover in 2014. We expect Venture to see
earnings growth pick up by 11% in 2014E as its businesses recover
from the poor performance in 1Q13. Potential cyclical upturns in
the Test & Measurement and Retail Store Solutions segments, as
well as fresh opportunities with new customers and new products
such as 3D printing, could also result in better-than-expected
upside to earnings in 2014E and 2015E. 3D printing to add a new
dimension in 2015. Venture has built the first prototype of an
industrial 3D printer for a new customer, one of the worlds largest
manufacturers of 3D printers. We are optimistic on the potential
for 3D printing, and anticipate the possibility of better revenue
emerging from this segment by 2015. Even the Singapore government
is investing half a billion dollars into developing this industry,
as announced in its Budget 2013. Free cash flow supportive of full
dividend. Our full-year 2013E EPS is SGD0.491, below our forecast
dividend of SGD0.50 per share. However, based on our forecast free
cash flow, we expect Venture to be able to maintain its dividend
payouts in 2013E and 2014E, giving a yield of more than 6.5%.
Despite a higher capex, we believe higher free cash flow is
achievable due to prudent working capital management and lower tax
payments. Venture Corporation Summary Earnings Table FYE Dec (SGD
m) 2012A 2013E 2014E 2015E 2016E Revenue 2,387.7 2,317.1 2,358.8
2,473.5 2,558.6 EBITDA 199.9 203.4 226.1 234.4 241.5 Recurring Net
Profit 139.7 134.6 149.0 155.1 162.3 Recurring Basic EPS (cents)
50.9 49.1 54.3 56.5 59.1 EPS Growth (%) (10.8) (3.6) 10.7 4.1 4.6
DPS (cents) 50.0 50.0 50.0 50.0 50.0 P/E (x) 15.1 15.6 14.1 13.6
13.0 EV/EBITDA (x) 10.2 10.0 9.0 8.7 8.5 Div Yield (%) 6.5 6.5 6.5
6.5 6.5 P/BV (x) 1.2 1.2 1.2 1.2 1.2 Net Cash (SGDm) 286.0 311.7
323.9 354.2 391.3 ROE (%) 7.6 7.5 8.3 8.6 8.9 ROA (%) 5.7 5.7 6.3
6.4 6.5 Consensus Net Profit (SGD m) 131 150 157 n/a Source:
Company, Maybank KE
Buy (from Hold) Share price: SGD7.68 Target price: SGD8.70 (from
SGD7.63) Gregory YAP [email protected] (65) 6432 1450 Stock
Information Description: Provides contract manufacturing services
to electronics companies worldwide, as well as manufacturing,
design, engineering, customisation and logistics services. Ticker:
VMS SP Shares Issued (m): 274.8 Market Cap (USD m): 1664.5 3-mth
Avg Daily Turnover (USD m): 1.3 ST Index: 3122.93 Free float (%):
59.0 Major Shareholders: % Aberdeen Asset Management 26.0
Sprucegrove Investment Management 8.0 Wong Ngit Liong 7.0 Key
Indicators ROE annualised (%) 6.9 Net cash (SGD m): 205.5 NTA/shr
(SGD): 3.79 Interest cover (x): 112.4
Historical Chart
Performance: 52-week High/Low SGD8.75/SGD7.06 1-mth 3-mth 6-mth
1-yr YTD Absolute (%) 2.1 1.6 6.7 -5.4 0.0 Relative (%) 1.8 2.1 8.2
-2.3 1.4
6.50
7.00
7.50
8.00
8.50
9.00
Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14
VMS SP Equity
.
-
7 January 2014 Page 2 of 16
Venture Corporation
Upgrade to BUY Earnings poised to recover in 2014. We expect
Venture to see earnings growth pick up by 11% in 2014E as its
businesses recover from the poor performance in 1Q13. Potential
cyclical upturns in the Test & Measurement (accounting for 26%
of group revenue) and Retail Store Solutions (30%) segments, as
well as fresh opportunities with new customers and new products
such as 3D printing, could also result in better-than-expected
upside to earnings in 2014E and 2015E.
The exception is the Printing & Imaging segment, where
M&A activities involving a key customer Intermec (which was
acquired by Honeywell in Sep 2013) could result in a temporary
slowdown in volume. However, we estimate that Intermec, as just one
of 19 customers in this segment, accounts for only 2-3% of group
revenue.
Figure 1: Segmental revenue forecasts (YoY growth) Figure 2:
Segmental revenue forecasts (%)
Source: Maybank KE Source: Maybank KE
2013 now looks like a fluke. 2013 has been mostly stable despite
a poor performance in 1Q13, which is the main reason why we expect
full-year earnings to decline 4%. 9M13 net profit has met 70% of
our full-year forecast of SGD134m and we expect no surprises in
4Q13. The Printing & Imaging business did poorly in 1Q13 as key
products reached end-of-life and were phased out in 4Q12/1Q13. 2013
was also affected by the continued slowdown of Networking &
Communications division from the high base of 2011-2012, and the
weakness of the US dollar. Since then however, Venture has shown
consistent QoQ improvement, posting the first positive YoY growth
in 3Q13.
Figure 3: Quarterly results, 1Q12-3Q13 1Q13 was hit badly by
Printing & Imaging due to products being phased out but there
has been consistent QoQ improvement since then
Figure 4: Segmental revenue trends, 1Q12-3Q13 Almost all
segments hit a trough in 1Q13 with consistent QoQ improvement
thereafter
Source: Company Source: Company
2012A 2013F 2014F 2015F 2016FTest &
Measurement/Medical/Others 581 636 646 665 686 YoY Growth (%) (7.4)
9.5 1.5 3.0 3.1 Networking & Communications 411 403 446 452 459
YoY Growth (%) (7.1) (1.9) 10.6 1.5 1.5 Computer Peripherals &
Data Storage 259 281 277 281 285 YoY Growth (%) (5.5) 8.2 (1.2) 1.5
1.5 Retail Store Solutions & Industrial Products 734 713 749
812 853 YoY Growth (%) 7.5 (2.8) 5.0 8.5 5.0 Printing & Imaging
403 284 242 262 275 YoY Growth (%) (0.9) (29.4) (15.0) 8.5 5.0
Total Revenue 2,375 2,330 2,375 2,488 2,570 YoY Growth (%) (2.3)
(1.9) 1.9 4.8 3.3
24% 27% 27% 27% 27%
17% 17% 19% 18% 18%
11% 12%12% 11% 11%
31% 31%32% 33% 33%
17% 12% 10% 11% 11%
0%10%20%30%40%50%60%70%80%90%
100%
2012A 2013F 2014F 2015F 2016F
Test & Measurement/Medical/Others Networking &
Communications
Computer Peripherals & Data Storage Retail Store Solutions
& Industrial Products
Printing & Imaging
0
5
10
15
20
25
30
35
40
480
500
520
540
560
580
600
620
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13
SGD'
m
Revenue Net profit (RHS)
50
70
90
110
130
150
170
190
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13
SGD'
m
Test & Measurement/Medical/Others Networking &
Communications
Computer Peripherals & Data Storage Retail Store Solutions
& Industrial Products
Printing & Imaging
-
7 January 2014 Page 3 of 16
Venture Corporation
Upgrade to BUY for 14% upside. We value Venture at SGD8.70, or
16x FY14E earnings, implying a 14% upside from current levels. In
our view, this is still a conservative target relative to its
comparables. For instance, Benchmark Electronics and Plexus, EMS
providers that operate on a similar high-mix, low-volume model, are
trading at an average of almost 18x current year forecast earnings,
while Ventures own key customers such as Agilent Technologies are
trading at 20x current year forecast earnings. In contrast,
Ventures FY14E dividend yield of 6.5% is far superior to the 1-2%
of both peer groups. From a historical standpoint, Venture also
looks cheap, trading below its historical average since the Global
Financial Crisis (Figures 6 and 7). We upgrade Venture to BUY from
HOLD.
Figure 5: Valuations peer comparison table
Source: FactSet
Figure 6: Venture forward P/E band Figure 7: Venture forward PBV
band
Source: FactSet Source: FactSet
Last close Market Cap Net margin (%)
Company (local crcy) (USD'm) Actual FY1 FY2 Actual FY1 FY2
Actual FY1 FY2 Actual Actual FY1 FY2Venture Corporation Limited
7.66 1664 16.0 14.0 13.3 1.2 1.2 1.2 6.5% 6.5% 6.8% 5.8% -4% 11%
4%
High Mix, Low Vol EMS - Average 37.9 17.7 13.5 2.3 2.2 1.9 1.1%
1.4% 1.7% 5.6% -24.2% 84.1% 34.4%HI-P International Limited 0.59
413 28.1 15.7 13.4 0.9 0.8 0.8 2.0% 3.2% 4.2% 1.5% -60% 79%
17%Jabil Circuit, Inc. 17.19 3549 7.6 15.5 10.5 1.5 1.5 1.4 1.9%
1.9% 1.9% 2.0% -6% -51% 48%Benchmark Electronics, Inc. 22.80 1231
19.0 15.8 14.3 1.1 1.1 1.0 0.0% 0.0% 0.0% 2.3% 21% -1% 21%Plexus
Corp. 42.79 1449 18.4 16.1 14.0 2.1 1.9 1.6 0.0% 0.0% 0.0% 3.7% -3%
15% 15%Planar Systems, Inc. 2.50 54 125.0 25.0 13.2 1.3 - - - - -
-3.9% -105% 400% 90%LARGAN Precision Co., Ltd. 1215.00 5441 29.2
17.9 15.6 7.1 5.6 4.5 1.4% 1.8% 2.4% 27.8% 7% 63% 15%
Key Customers - Average 25.4 20.5 16.7 3.3 2.9 2.6 0.7% 0.8%
0.9% 5.0% 15.1% 24.2% 21.9%Agilent Technologies, Inc. 56.92 18887
19.8 17.8 15.9 3.6 3.1 2.7 0.8% 0.7% 0.7% 10.7% -8% 11% 12%JDS
Uniphase Corporation 13.03 2990 23.7 22.5 15.6 2.7 2.4 2.3 0.0%
0.0% 0.0% 3.4% -7% 5% 44%Finisar Corporation 23.72 2280 37.1 14.9
13.4 2.9 2.5 2.2 0.0% 0.0% 0.0% -0.6% -26% 148% 12%VeriFone
Systems, Inc. 25.79 2848 17.9 18.4 13.7 2.5 2.3 2.1 0.0% 0.0% 0.0%
-17.4% -47% -3% 35%NCR Corporation 33.98 5654 13.6 12.3 10.9 4.4
3.4 2.7 0.0% - - 2.4% 30% 11% 12%MICROS Systems, Inc. 56.64 4264
23.8 23.0 20.7 4.0 3.8 3.3 - - - 13.5% 7% 4% 11%Ingenico SA 59.65
4309 22.1 19.0 16.5 4.5 4.0 3.5 1.2% 1.3% 1.6% 8.0% 65% 50%
16%Toshiba Tec Corp. 729.00 2011 32.2 23.3 13.7 1.4 1.2 1.1 1.1%
1.1% 1.9% 1.5% 142% 38% 70%Waters Corporation 98.04 8346 19.8 17.9
16.1 5.9 5.1 4.4 0.0% 0.0% 0.0% 25.0% 2% 0% 11%ABB Ltd. 23.60 60419
17.9 15.6 14.2 3.5 3.3 2.9 2.8% 2.9% 3.1% 6.9% -16% 22%
15%PerkinElmer, Inc. 41.21 4632 20.0 17.1 15.0 2.4 2.3 2.2 0.7%
0.7% 0.7% 3.2% 13% 0% 17%3D printing customer 136.46 6651 74.0 57.7
44.1 3.3 2.3 2.6 0.0% 0.0% 0.0% 3.9% 54% 24% 28%Hewlett-Packard
Company 28.34 54095 7.7 7.5 7.3 2.0 1.7 1.5 2.0% 2.1% 2.3% 4.6%
-12% 3% 2%
PER (x) EPS Growth (%)PBR Dividend yield (%)
10.0
11.0
12.0
13.0
14.0
15.0
16.0
17.0
18.0
+1 SD = 16.5x
(x)
Mean = 14.9x
-1 SD = 13.3x
0.9
1.0
1.1
1.2
1.3
1.4
1.5
+1 SD = 1.4x
(x)
Mean = 1.2x
-1 SD = 1.1x
-
7 January 2014 Page 4 of 16
Venture Corporation
Key drivers in 2014
Test & Measurement Agilent restructuring a boon. Key
customer Agilent has proposed to split into two companies, one
focusing on Life Sciences, Diagnostics and Applied Markets (LDA)
and the other on Electronic Measurement (EM) devices. The split was
motivated by investor preference for pure plays as Agilent is now
categorised as a healthcare products company instead of an
electronics products company. The high-growth healthcare business
(LDA) now accounts for 52% of Agilents total revenue, up from 38%
five years ago. However, despite its faster growth, LDA needs more
capital than the cyclical but cash-generative EM business. In the
past four years, Agilent invested USD3.8b in LDA compared to just
USD100m in EM.
In our view, the split will be good for both Agilent and
Venture, its supplier in both businesses. There will be separate
managements and both divisions will be able to focus resources and
pursue growth independently. Venture expects the EM division to
remain stable in 2014E with faster growth in 2015E as the cycle
returns to its favour. EM currently contributes more revenue to
Venture. But management thinks the higher-growth LDA division will
be a larger contributor in 3-5 years.
Figure 8: Agilent consensus estimates
Source: FactSet
Figure 9: Agilent product segments relevant to Venture
Source: FactSet
Networking & Communications customer relocation to drive
growth. Venture is one-third of the way through relocating its
manufacturing base from Shenzhen to Penang, Malaysia with its
optical communications customer Oclaro. With full extraction by
end-2014E, this will be a major revenue driver for this year.
Similarly, payment solutions provider Verifone, which bought
Ventures customer Hypercom in 2011, is expected to ramp up in
2015E.
Figure 10: Oclaro consensus estimates
Source: FactSet
Figure 11: Verifone consensus estimates
Source: FactSet
EPS (USD) Growth (% YoY) Sales (USD'm) Growth (% YoY)Oct 2013A
2.87 -8 6782 -1Oct 2014F 3.19 11 7041 4Oct 2015F 3.57 12 7416 5Next
reporting: 17 Feb 2014
2013A 2014F 2015F 2016F- Electronic Measurement 2888 2959 3105
3169 % Growth (YoY) -13 2 5 2- Life Sciences 1808 2254 2377 2686 %
Growth (YoY) 14 25 5 13
EPS (USD) Growth (% YoY) Sales (USD'm) Growth (% YoY)Jun 2013A
-1.38 nm 586 52Jun 2014F -1.00 nm 406 -31Jun 2015F -0.42 nm 438
8Next reporting: 30 Jan 2014
EPS (USD) Growth (% YoY) Sales (USD'm) Growth (% YoY)Oct 2013A
1.44 -47 1709 -9Oct 2014F 1.41 -2 1793 5Oct 2015F 1.88 34 1948
9Next reporting: 4 Mar 2014
Dont worry about the forecast losses for Oclaro as the main
reason why it is using Venture as an EMS provider is to reduce
its production cost in China. Oclaros business with Venture was
negligible in
2013 but is expected to ramp in 2014E as the relocation gains
momentum. More importantly, the forecasts hint at lower
losses, a sign that investors expect the relocation to succeed
in reducing costs
Investors expect a turnaround in 2014E-2015E on the back of a
cyclical upturn
for Agilents Electronic Measurement business as well as strong
growth
in the Life Sciences division
Note the significantly faster growth expected of the Life
Sciences division
Verifone acquired Ventures customer Hypercom in 2011. It is
expected to begin
turning around in 2014E after a horrendous year in 2013. Venture
has not only kept
Hypercom as a customer but also gained Verifone as a new
customer, and started
shipping products for Verifone in 2Q13
-
7 January 2014 Page 5 of 16
Venture Corporation
Retail Store Solutions potential upgrade cycle in the making.
The Retail Store Solutions (RSS) business basically point-of-sales
solutions for retailers and hospitality service providers is long
overdue for a capex upgrade cycle but retail sales have not been
cooperating. While retailers have been upgrading, they have done it
on a piecemeal basis and have not invested en masse.
Figure 12: US monthly retail trade and food services US retail
sales growth, at 3.4% on average in 2013, is currently below its
long-term average of 4.7%
Figure 13: EU monthly retail trade index European Union retail
sales growth is still below the long-term mean of 0.9%, albeit
improving from recent lows
Source: US Census Bureau Source: Eurostat
Further, M&A activities in 2011-2012 involving its customers
(eg, NCR acquired Radiant Systems, Toshiba TEC acquired IBM Retail
POS) resulted in temporary disruptions to the supply chain.
Ventures three largest RSS clients currently are NCR, Toshiba and
MICROS Systems.
Going forward, we see opportunities with MICROS and NCR that
should allow the RSS business to remain stable in 2014E/2015E.
MICROS in particular has introduced a new tablet cum fixed POS
solution that Venture is confident will find favour with F&B
retailers, while NCR is executing well on its post-acquisition
integration with Radiant (POS systems) and Retalix (POS software).
As for the ex-IBM business, Venture expects things to normalise
this year after a good 2012-2013 when IBM customers brought more
products in the wake of the acquisition by Toshiba TEC.
Figure 14: NCR consensus estimates
Source: FactSet
Figure 15: MICROS Systems consensus estimates
Source: FactSet
Figure 16: Toshiba TEC consensus estimates
Source: FactSet
(10.0)
(5.0)
-
5.0
10.0
15.0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
%
USD'
m
Monthly Retail Trade & Food Services (excl Auto) Seasonally
adjusted YoY growth
(5.0)(4.0)(3.0)(2.0)(1.0)-1.0 2.0 3.0 4.0 5.0
80.00
85.00
90.00
95.00
100.00
105.00
110.00
Jan-
01Au
g-01
Mar
-02
Oct-0
2M
ay-0
3De
c-03
Jul-0
4Fe
b-05
Sep-
05Ap
r-06
Nov-
06Ju
n-07
Jan-
08Au
g-08
Mar
-09
Oct-0
9M
ay-1
0De
c-10
Jul-1
1Fe
b-12
Sep-
12Ap
r-13
%
Retail Trade Index (excl Motor Vehicles) Seasonally adjusted YoY
growth
EPS (USD) Growth (% YoY) Sales (USD'm) Growth (% YoY)Dec 2013A
2.77 11 6228 9Dec 2014F 3.12 12 6712 8Dec 2015F 3.60 16 7153 7
EPS (USD) Growth (% YoY) Sales (USD'm) Growth (% YoY)Jun 2013A
2.38 7 1268 14Jun 2014F 2.46 4 1313 4Jun 2015F 2.73 11 1383 5Next
reporting: 23 Jan 2014
EPS (JPY) Growth (% YoY) Sales (JPY'm) Growth (% YoY)Mar 2013A
22.64 142 403693 15Mar 2014F 31.35 38 490500 22Mar 2015F 53.40 70
503450 3Next reporting: 29 Jan 2014
Both NCR and MICROS expected to do better in 2014E-2015E
compared to 2013.
NCR is starting to execute well following its acquisition of
Radiant in 2011, while
MICROS has new POS solutions in the market
-
7 January 2014 Page 6 of 16
Venture Corporation
Industrial Products executing well with key customers.
Industrial products, which account for 50% of the total Retail
Store Solutions & Industrial Products segment, should continue
to do well. Two customers stand out Waters, a US-based liquid
analytical instrument company, and ABB, a Swiss power and
automation control systems company. Venture reports that it is
executing well with Waters and is gaining traction with the
manufacturing of the formers water chromatography devices, while
ABBs momentum is expected to remain stable.
Figure 17: Waters consensus estimates
Source: FactSet Figure 18: ABB consensus estimates
Source: FactSet
Printing & Imaging some rough quarters ahead. Ruggedised
handheld scanner maker Intermec, a key customer in this segment,
was recently acquired by Honeywell Scanning & Mobility, which
is also in the same business. Honeywell intends to integrate
Intermecs products into its business and continue using Intermecs
supply chain. But, as with any M&A integration, there are bound
to be product overlaps that may affect volume. With a total of 19
customers in its Printing & Imaging division, we estimate that
Intermec accounts for only 2-3% of Ventures total group revenue in
2013.
In our view, the shortfall from Intermec could be mitigated by
HP, which recently reported above-expectations results on the back
of an acceleration in corporate IT spending. If HPs execution
remains good, Ventures Printing & Imaging revenue should
benefit from the turnaround in HPs prospects.
Figure 19: HP consensus estimates
Source: FactSet
EPS (USD) Growth (% YoY) Sales (USD'm) Growth (% YoY)Dec 2013A
4.95 0 1873 2Dec 2014F 5.47 11 1967 5Dec 2015F 6.09 11 2075 5Next
reporting: 21 Jan 2014
EPS (CHF) Growth (% YoY) Sales (CHF'm) Growth (% YoY)Dec 2013A
1.32 18 37314 4Dec 2014F 1.49 13 38682 4Dec 2015F 1.63 10 40172
4Next reporting: 13 Feb 2014
EPS (USD) Growth (% YoY) Sales (USD'm) Growth (% YoY)Oct 2013A
3.56 -12 112298 -7Oct 2014F 3.65 3 109057 -3Oct 2015F 3.76 3 108391
-1Next reporting: 19 Feb 2014
Waters and ABB account for the bulk of the Industrial Products
revenue in 2013. The
duo, along with a private customer Elsters, are expected to do
well in 2014E-2015E
HPs earnings are expected to recover in 2014E-2015E on improving
margins
and cash flow
-
7 January 2014 Page 7 of 16
Venture Corporation
3D printing the wild card In 2015 First 3D printer built for
customer. Venture has built the first prototype of an industrial 3D
printer for a new customer in Shanghai. The customer is one of the
worlds largest manufacturers of 3D printers and a public company
listed on NASDAQ. Although it started out as a high-end printer
maker, recent developments, which included M&A, suggest that it
intends to build a comprehensive presence in the fledgling 3D
printing market, ranging from low-end consumer printers costing a
few thousand dollars (excluding barebones hobbyist kits that can
now be found for USD500-700) to high-end industrial printers that
exceed USD500,000.
What is 3D printing? Current 2D printers are used to print
documents on pieces of paper, using either inkjet (depositing ink
drops directly onto the paper) or laser technologies (passing a
laser beam over a toner-charged drum to create an image that is
then transferred to paper using heat). However, 3D printers can
create a three-dimensional solid object of virtually any shape,
typically using a plastic resin to build it up layer by layer.
Wide-ranging applications. 3D printing was originally used for
making rapid prototypes of new products before they are put into
mass production using conventional manufacturing methods. This is
still the largest commercial application at 70% of the 3D printing
market. With technological improvements however, some industries
have moved it out of the R&D lab onto the production floor on a
small scale. For example, big car makers GM, Audi and Ford are 3D
printing auto parts such as transmission cases, brake rotors and
even small engine blocks. GE uses 3D printing to make aircraft
engine parts, such as turbine blades and fuel nozzles, while Boeing
3D prints 200 parts for 10 aircraft platforms. In the healthcare
industry, custom-printed hearing aids sold more than 1m units in
2011 and more than 40,000 hip cups (the socket for hip joint
replacements) have been built using 3D printing. Even human body
parts such as veins, arteries, hearts and ears can now be 3D
printed, albeit not yet at the size of real human organs. Other
early adopters also include the jewellery and clothing
industries.
Figure 22: 3D printed guitar and human ear Figure 23: 3D printed
dress for Dita Von Teese
Source: Various Source: Designed by Michael Schmidt, 3D printed
by Shapeways
Advantages of 3D printing. The pros of 3D printing are mainly
two-fold. One, it does not waste materials because 3D printing is
an additive manufacturing method, where the part is built up
compared with the conventional subtractive methods, where the
material is removed by cutting or drilling. Two, 3D printed parts
are often lighter, if not stronger than conventionally made
parts.
Figure 20: Example of high-end 3D printer
Source: Company Figure 21: Example of low-end 3D printer
Source: Company
-
7 January 2014 Page 8 of 16
Venture Corporation
But still in the hype stage. 3D printing technology was invented
in the 1980s, and the current market leader 3D Systems went public
in 1994. In the past two years however, media and public interest
has exploded alongside the valuations of the US-listed market
leaders 3D Systems (DDD US, market cap USD9.9b) and Stratasys (SSYS
US, market cap USD6.6b). Some predict that half of US households
will own a 3D printer by 2020. Hollywood has played its role too
well as many consumers have been brought up on the idea of Star
Trek-style matter replicators.
Figure 24: Hype cycle for emerging technologies
Source: Gartner
Figure 25: 3D Systems forward P/E band Figure 26: Stratasys
forward P/E band
Source: FactSet Source: FactSet
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
+1 SD = 52.6x
(x)
Mean = 33.7x
-1 SD = 14.9x
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0+1 SD = 57.0x
(x)
Mean = 44.7x
-1 SD = 32.3x
(x)
-
7 January 2014 Page 9 of 16
Venture Corporation
Many obstacles still need to be overcome. The consumer market is
made up of mainly hobbyists and enthusiasts, while the biggest
commercial buyers are the universities and the automotive and
aircraft industries. Retail prices are still high (at least
USD1,299 for a basic one-material, one-colour printer that can only
print parts up to 5.5x5.5x5.5) and patents on key print
technologies will not expire for years. Ease of use needs to be
improved, namely, the CAD/CAM software required to create 3D
digital models. More colours need to be offered, consumable prices
must come down and the printing itself must get faster. Without
these factors, most consumers will probably not see the need to own
a 3D printer. For industries, speed and capacity are the stumbling
blocks as todays 3D printers are still very, very slow (at least
four hours to print a small part) and does not translate into lower
unit costs in the mass production stage, unlike conventional
manufacturing.
Quest for right business model. At this stage, companies
themselves are unsure of how the emerging 3D personal manufacturing
revolution will work out. As such, they are trying out various
business models in the consumer market. Big retailers such as
Office Depot and Staples are experimenting with a two-pronged
product and services strategies, offering 3D printing services in
their stores in Europe and selling USD1,299 printers in the US.
Office Depot admitted that it is still tinkering with its strategy
based on customer feedback.
One study, which we think is realistic, was done by 3D printing
industry analysis firm, Wohlers Associates. It estimated the
industrys size at USD2.2b in 2012, up 29% from 2011, and forecasts
the market to be worth USD6.5b by 2017. But this would still be a
fraction of the size of the conventional manufacturing market of
USD93b in 2012.
Figure 27: Global market size of 3D printing The value of 3D
printing products and services is expected to triple by 2017 and
quintuple by 2021
Figure 28: Value of 3D parts as % of total 3D market 3D printed
final parts only account for 28% of the total market value of 3D
printed products, with 70% still coming from prototypes
Source: Wohlers Associates Source: Wohlers Associates
Long-term opportunities for Venture. Venture sees strong
long-term opportunities in 3D printing as it is skilled in the
following areas that will be of great value to 3D printer
customers.
Specialist in electro-mechanical components. A 3D printer has
many moving parts that must fit together and work flawlessly. Most
importantly, the consumable delivery system is a key knowledge
domain that Venture can bring to the table as it has deep
experience in 2D printers. In fact, it is not well known that
Venture has a subsidiary, VIPColor, which sells its own branded
colour label printer with proprietary ink delivery technology.
1.1 1.3 1.7
2.2
4.0
6.0
8.0
10.0
-
2.0
4.0
6.0
8.0
10.0
12.0
2009 2010 2011 2012 2015F 2017F 2019F 2021F
USD'
b
3.9
6.68.3
9.911.7
14.0
17.2
19.8
24.0
28.3
0.0
5.0
10.0
15.0
20.0
25.0
30.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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7 January 2014 Page 10 of 16
Venture Corporation
Strong end-product design capabilities. Most prototypes form
factors are usually not ready for final market launch, and Venture
can play a critical role in materialising and/or neatening the
final form factor. For example, it can help to create the hardware
architecture, as well as redesign and recount the individual
components. All of these will be high value-added design work that
Venture can charge by the number of man-hours.
A high-margin business. According to management, the 3D printer
business is expected to yield a net margin in excess of 15%. This
is in sharp contrast to its traditional net margin of 6-8%, which
already makes Venture one of the most profitable EMS providers in
the world. At this stage, Venture will focus on high-end 3D
printers that cost more than USD1m each. It is also eyeing the
mid-range printer market with price points above USD100,000. Its
current 3D printer customer has made aggressive acquisitions in
both the low-end and mid-range segments of the market and we
believe this will translate into substantial opportunities for
Venture.
Figure 29: Net margin trend, 1Q03-3Q13 Long-term net margin has
been around 5-9%, with a medium-term target of 6-8%. The 2008-2009
volatility was caused by CDO-related write-offs.
Figure 30: Peer net margin comparison Venture has one of the
highest margins in the global EMS industry, even at the current
depressed end of its long-term range
Source: Company, Maybank KE Source: Company, Maybank KE
2015 should be the year for 3D. At this juncture, there will be
some revenue in 2014 as Venture is just starting to develop the 3D
printer business. We expect more substantive revenue upside from 3D
printing in 2015 and beyond, although this cannot be quantified at
present. We are optimistic on the long-term potential of 3D
printing, not just because of the emerging opportunities and market
excitement over the product, but also because the leading players
have raised a substantial amount of capital that would help drive
the growth of 3D printing. Closer to home, the Singapore
government, in its Budget 2013 announcement, said it has set aside
SGD500m over the next five years to promote 3D printing. Hence, we
expect to see more 3D printing products and services coming to
market by 2015. Hence, we are forecasting 8.5% growth in Printing
& Imaging revenue in 2015E, reversing a 15% expected decline in
2014E.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
1Q03 4Q03 3Q04 2Q05 1Q06 4Q06 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11 1Q12
4Q12 3Q13
%
Reported Net Margin Normalised Net Margin
0.9
1.1
1.2
1.8
2.0
2.3
2.9
4.3
5.9
6.0
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Cal-Comp Electronics Thailand
Wistron Corp
Flextronics International
Celestica
Jabil Circuit
Benchmark Electronics
Hon Hai Precision Industry Co
Amtek Engineering
Venture Corp
Asustek Computer
%
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7 January 2014 Page 11 of 16
Venture Corporation
Dividends in the bank Free cash flow supportive of full
dividend. Our full-year 2013E EPS is SGD0.491, below our forecast
dividend of SGD0.50 per share (or SGD137m). However, based on our
forecast free cash flow of SGD158m n 2013E and SGD147m in 2014E, we
expect Venture to be able to maintain this level of dividend
payouts in both years. At the current stock price, this would
translate to a yield of more than 6.5%. Despite a higher capex, we
believe higher free cash flow is achievable due to prudent working
capital management and lower tax payments (following the recent
clinching of tax-free pioneer status in Malaysia).
Figure 31: Venture working capital assumptions
Source: Company, Maybank KE Expanding capacity to support
growth. Forward capex spending is almost always a key sign that a
company is optimistic about its future. We expect Ventures capex
for 2013E and 2014E to be higher than the usual annual maintenance
capex of SGD25-30m as the company is expanding floor space in
Singapore and Johor Bahru, Malaysia, in 2013/2014 in the first
round of investment and again in Penang, Malaysia, in 2015.
Specifically, this will involve:
First round the purchase of two currently leased facilities in
Tebrau and Senai, Malaysia, for MYR27.1m, and a currently leased
Singapore factory for SGD38m. A 10% deposit has been paid in 3Q13
for both purchases and the balance will be fully paid by 4Q13 and
1Q14 respectively.
Second round Venture has contracted to purchase land in the
proposed Batu Kawan industrial area in Malaysia near Penang, which
will be served by the Penang Second Bridge that opens next month.
Its current manufacturing facility is in the Bayan Lepas industrial
area on Penang island, and it looks like Batu Kawan will be a
better location as it will be closer to the Second Bridge. However,
the size of the land has not been determined and we anticipate the
bulk of the capex (likely to be less than MYR100m) will only be
incurred in 2015.
2012A 2013F 2014F 2015F 2016FNet cash (SGD'm) 286 312 324 354
391 Working capital (SGD'm) 643 635 646 712 736 Working capital (%
of revenue) 27 27 27 29 29 Working capital days 98 100 100 105 105
- Inventory days 76 85 85 85 85 - Receivable days 66 65 65 70 70 -
Payable days 44 50 50 50 50 Operating cashflow (SGD'm) 129 190 212
205 216 Capex (SGD'm) (30) (43) (59) (30) (30) Free cashflow
(SGD'm) 99 147 152 175 186 Dividends 137 137 137 137 137
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7 January 2014 Page 12 of 16
Venture Corporation
PROFIT AND LOSS (SGD m) BALANCE SHEET (SGD m) FYE Dec 2012A
2013E 2014E 2015E 2016E FYE Dec 2012A 2013E 2014E 2015E 2016E Sales
2,387.7 2,317.1 2,358.8 2,473.5 2,558.6 Total Assets 2,372.6
2,367.5 2,382.5 2,470.4 2,498.5
Cost of goods sold (1,858.2) (1,781.8) (1,804.5) (1,892.2)
(1,957.3) Current Assets 1,414.1 1,435.0 1,465.5 1,566.8 1,641.7
Gross Profit 529.5 535.3 554.3 581.3 601.3 Cash & ST investment
453.4 446.2 459.0 489.9 527.8
Operating expenses (396.9) (398.6) (405.9) (426.7) (439.6)
Inventories 497.4 539.6 549.3 576.0 595.8 Operating Profit 132.6
136.7 148.4 154.5 161.7 Accounts receivable 463.1 447.4 455.4 499.1
516.3 Net Interest 4.2 0.7 0.9 1.0 1.2 Others 0.2 1.8 1.8 1.8
1.8
Interest Income 5.8 2.2 2.3 2.4 2.5 Non-current Assets 958.6
932.4 916.9 903.6 856.8 Interest Expense (1.6) (1.5) (1.3) (1.4)
(1.4) LT investments 96.3 98.2 100.2 102.2 104.2
Net Investment income/(loss) 0.0 0.0 0.0 0.0 0.0 Net PPE 138.6
136.4 145.9 157.5 135.7 Net other non-op. JV+Assc. 6.1 2.7 2.0 2.0
2.0 Others 723.7 697.9 670.9 643.9 616.9 Net extraordinaries 0.0
0.0 0.0 0.0 0.0 Total Liabilities 572.8 571.4 579.5 658.9 676.0
Pretax profit 143.0 140.2 151.4 157.6 164.9 Current Liabilities
559.3 553.9 562.0 608.1 625.2 Income taxes (3.9) (5.6) (2.2) (2.3)
(2.4) Accounts payable 384.3 410.1 417.5 462.5 478.4 Minority
Interest (0.6) (0.1) 0.1 0.2 0.2 ST borrowings 167.4 134.5 135.0
135.7 136.5 Net Profit 139.7 134.6 149.0 155.1 162.3 Others 7.6 9.3
9.4 9.9 10.2 EBITDA 199.9 203.4 226.1 234.4 241.5 Long-term
liabilities 13.6 17.5 17.5 50.8 50.8 EPS (cents) 50.9 49.1 54.3
56.5 59.1 Long-term debts 0.0 0.0 0.0 0.0 0.0 Convertible notes 0.0
0.0 0.0 0.0 0.0 Others 13.6 17.5 17.5 17.5 17.5 Shareholder's
equity 1,797.4 1,793.8 1,800.7 1,809.1 1,820.0 Paid-in capital
673.2 675.0 675.0 675.0 675.0 Reserve 1,124.1 1,118.8 1,125.7
1,134.1 1,145.0 Minority Interest 2.5 2.3 2.4 2.5 2.6 CASH FLOW
(SGD m) KEY RATIOS FYE Dec 2012A 2013E 2014E 2015E 2016E FYE Dec
2012A 2013E 2014E 2015E 2016E Operating cash flow 161.0 200.9 206.4
195.3 201.7 Growth (% YoY)
Net Profit 139.0 134.6 149.1 155.2 162.4 Sales (1.8) (3.0) 1.8
4.9 3.4 Depreciation & Amortisation 67.3 66.8 77.7 79.8 79.8
EBIT (14.8) 3.1 8.6 4.1 4.6 Change in Working Capital (15.1) (0.7)
(10.4) (25.3) (21.1) EBITDA (5.7) 1.8 11.2 3.6 3.0 Others (24.4)
2.6 (7.8) (12.1) (16.9) Net profit (11.1) (3.2) 10.8 4.1 4.6
Investment cash flow (33.2) (39.8) (56.9) (61.1) (27.5) EPS
(10.8) (3.6) 10.7 4.1 4.6 Net Capex (29.6) (42.7) (59.2) (63.5)
(30.0) Profitability (%) Net Investments 0.0 0.0 0.0 0.0 0.0 Gross
Margin 22.2 23.1 23.5 23.5 23.5 Change in other assets (3.7) 2.8
2.3 2.4 2.5 EBITDA Margin 8.4 8.8 9.6 9.5 9.4
Financing cash flow (187.6) (168.3) (136.7) (103.3) (136.4) EBIT
Margin 5.6 5.9 6.3 6.2 6.3 Change in share capital 0.0 1.8 0.0 0.0
0.0 Net Margin 5.8 5.8 6.3 6.3 6.3 Dividends paid (150.9) (137.2)
(137.2) (137.2) (137.2) ROA 5.7 5.7 6.3 6.4 6.5 Net change in debt
(36.7) (32.9) 0.5 33.9 0.8 ROE 7.6 7.5 8.3 8.6 8.9 Change in other
LT liab. 0.0 0.0 0.0 0.0 0.0 Total Debt/Equity (X) 0.1 0.1 0.1 0.1
0.1
Net cash flow (59.8) (7.2) 12.7 30.9 37.9 Net Debt/Equity (X)
(0.2) (0.2) (0.2) (0.2) (0.2) Free cash flow 131.5 158.3 147.2
131.8 171.7 Int. coverage (X) 82.0 90.5 110.1 114.2 118.8
Int. & ST debt coverage
0.8 1.0 1.1 1.1 1.2 Cashflow int. coverage (X) 99.6 133.1 153.1
144.3 148.2
Cashflow int. & ST debt (x) 1.0 1.5 1.5 1.4 1.5 Current
Ratio (X) 2.5 2.6 2.6 2.6 2.6 Quick Ratio (X) 1.6 1.6 1.6 1.6 1.7
Net cash (SGDm) (286.0) (311.7) (323.9) (354.2) (391.3) Per share
data (SGD cts) EPS 50.9 49.1 54.3 56.5 59.1 CFPS 58.7 73.2 75.2
71.2 73.5 BVPS 655.0 653.7 656.2 659.3 663.3 SPS 870.2 844.4 859.6
901.4 932.4 EBITDA/Share 72.9 74.1 82.4 85.4 88.0 DPS 50.0 50.0
50.0 50.0 50.0
Source: Company, Maybank KE
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7 January 2014 Page 13 of 16
Venture Corporation
RESEARCH OFFICES REGIONAL
WONG Chew Hann, CA Regional Head, Institutional Research (603)
2297 8686 [email protected]
Alexander GARTHOFF Institutional Product Manager (852) 2268 0638
[email protected]
ONG Seng Yeow Regional Head, Retail Research (65) 6432 1453
[email protected]
ECONOMICS Suhaimi ILIAS Chief Economist Singapore | Malaysia
(603) 2297 8682 [email protected]
Luz LORENZO Philippines (63) 2 849 8836
[email protected]
Tim LEELAHAPHAN Thailand (662) 658 1420
[email protected]
JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext
29682 [email protected] Josua PARDEDE Economist / Industry
Analyst, BII Indonesia (62) 21 29228888 ext 29695
[email protected]
MALAYSIA WONG CHEW HANN, CA Head of Research (603) 2297 8686
[email protected] Strategy DESMOND CHNG, ACA (603) 2297 8680
[email protected] Banking & Finance LIAW THONG JUNG
(603) 2297 8688 [email protected] Oil & Gas Regional
Shipping ONG CHEE TING, CA (603) 2297 8678 [email protected]
Plantations Regional MOHSHIN AZIZ (603) 2297 8692
[email protected] Aviation Regional Petrochem YIN SHAO
YANG, CPA (603) 2297 8916 [email protected] Gaming Regional
Media TAN CHI WEI, CFA (603) 2297 8690 [email protected]
Power Telcos WONG WEI SUM, CFA (603) 2297 8679
[email protected] Property & REITs LEE YEN LING (603) 2297
8691 [email protected] Building Materials Glove producers
CHAI LI SHIN (603) 2297 8684 [email protected] Plantation
Construction & Infrastructure KANG CHUN EE (603) 2297 8675
[email protected] Consumer IVAN YAP (603) 2297 8612
[email protected] Automotive LEE Cheng Hooi, Regional
Chartist (603) 2297 8694 [email protected] Tee Sze
Chiah, Head of Retail Research (603) 2297 6858
[email protected]
HONG KONG / CHINA Howard WONG Head of Research (852) 2268 0648
[email protected] Oil & Gas - Regional Alexander LATZER
(852) 2268 0647 [email protected] Metals & Mining -
Regional Alison FOK (852) 2268 0630 [email protected]
Consumer Jacqueline KO, CFA (852) 2268 0633
[email protected] Consumer Karen KWAN (852) 2268 0640
[email protected] HK & China Property Osbert TANG, CFA
(852) 2268 0800 [email protected] Transport &
Industrials Philip TSE, CFA FRM (852) 2268 0643
[email protected] HK & China Property Simon QIAN, CFA
(852) 2268 0634 [email protected] Telecom & Internet
Steven CHAN (852) 2268 0645 [email protected] Banking &
Financials Warren LAU (852) 2268 0644 [email protected]
Technology Regional William YANG (852) 2268 0675
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INDIA Jigar SHAH Head of Research (91) 22 6623 2601
[email protected] Oil & Gas Automobile Cement Anubhav
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SINGAPORE NG Wee Siang Head of Research (65) 6432 1467
[email protected] Banking & Finance Gregory YAP (65)
6432 1450 [email protected] SMID Caps Regional Technology
& Manufacturing Telcos Wilson LIEW (65) 6432 1454
[email protected] Property Developers ONG Kian Lin (65)
6432 1470 [email protected] S-REITs James KOH (65) 6432
1431 [email protected] Consumer - Regional YEAK Chee
Keong, CFA (65) 6432 1460 [email protected] Offshore
& Marine Derrick HENG (65) 6432 1446
[email protected] Transport (Land, Shipping &
Aviation) Wei Bin (65) 6432 1455 [email protected] Commodity
Logistics S-chips John CHEONG (65) 6432 1461
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INDONESIA Wilianto IE Head of Research (62) 21 2557 1125
[email protected] Strategy Rahmi MARINA (62) 21 2557
1128 [email protected] Banking & Finance Aurellia
SETIABUDI (62) 21 2953 0785 [email protected]
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[email protected] Consumer Poultry Isnaputra ISKANDAR
(62) 21 2557 1129 [email protected] Metals &
Mining Cement Pandu ANUGRAH (62) 21 2557 1137
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Transport Janni ASMAN (62) 21 2953 0784
[email protected] Cigarette Healthcare Retail Lucky
ARIESANDI, CFA (62) 21 2557 1127 [email protected]
Telcos Media
PHILIPPINES Luz LORENZO Head of Research (63) 2 849 8836
[email protected] Strategy Laura DY-LIACCO (63) 2 849
8840 [email protected] Utilities Conglomerates
Telcos Lovell SARREAL (63) 2 849 8841
[email protected] Consumer Media Cement Rommel
RODRIGO (63) 2 849 8839 [email protected]
Conglomerates Property Ports/ Logistics Gaming Katherine TAN (63) 2
849 8843 [email protected] Banks Construction Ramon
ADVIENTO (63) 2 849 8845 [email protected]
Mining
THAILAND Sukit UDOMSIRIKUL Head of Research (66) 2658 6300 ext
5090 [email protected]
Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440
[email protected] Strategy Padon Vannarat (66) 2658 6300
ext 1450 [email protected] Strategy Surachai
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[email protected] Auto Conmat Contractor Steel Suttatip
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(66) 2658 6300 ext 1520 [email protected] Property
Woraphon WIROONSRI (66) 2658 6300 ext 1560
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Transportation Small cap. Chatchai JINDARAT (66) 2658 6300 ext 1401
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Institutional Research
Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 |
(66) 2658 6300 ext 1399 [email protected] Consumer /
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844 55 58 88 x 8181 [email protected] Strategy Consumer
Diversified Utilities Thai Quang Trung, CFA, Deputy Manager,
Institutional Research (84) 844 55 58 88 x 8180
[email protected] Real Estate Construction Materials
Truong Thanh Hang (84) 844 55 58 88 x 8085
[email protected] Consumer Le Nguyen Nhat Chuyen
(84) 844 55 58 88 x 8082 [email protected] Oil &
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Nguyen Thi Ngan Tuyen Head of Retail Research (84) 844 55 58 88
x 8081 [email protected] Food and Beverage Oil
& Gas Sony Tra Mi (84) 844 55 58 88 x 8084
[email protected] Pharmaceutical Trinh Thi Ngoc Diep
(84) 844 55 58 88 x 8242 [email protected]
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88 x 8083 [email protected] Consumer Nguyen Trung Hoa
(84) 844 55 58 88 x 8088 [email protected] Steel
Sugar Resources
-
7 January 2014 Page 14 of 16
Venture Corporation
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND
DISCLOSURES DISCLAIMERS This research report is prepared for
general circulation and for information purposes only and under no
circumstances should it be considered or intended as an offer to
sell or a solicitation of an offer to buy the securities referred
to herein. Investors should note that values of such securities, if
any, may fluctuate and that each securitys price or value may rise
or fall. Opinions or recommendations contained herein are in form
of technical ratings and fundamental ratings. Technical ratings may
differ from fundamental ratings as technical valuations apply
different methodologies and are purely based on price and
volume-related information extracted from the relevant
jurisdictions stock exchange in the equity analysis. Accordingly,
investors returns may be less than the original sum invested. Past
performance is not necessarily a guide to future performance. This
report is not intended to provide personal investment advice and
does not take into account the specific investment objectives, the
financial situation and the particular needs of persons who may
receive or read this report. Investors should therefore seek
financial, legal and other advice regarding the appropriateness of
investing in any securities or the investment strategies discussed
or recommended in this report. The information contained herein has
been obtained from sources believed to be reliable but such sources
have not been independently verified by Maybank Investment Bank
Berhad, its subsidiary and affiliates (collectively, MKE) and
consequently no representation is made as to the accuracy or
completeness of this report by MKE and it should not be relied upon
as such. Accordingly, MKE and its officers, directors, associates,
connected parties and/or employees (collectively, Representatives)
shall not be liable for any direct, indirect or consequential
losses or damages that may arise from the use or reliance of this
report. Any information, opinions or recommendations contained
herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often
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assumptions made and information currently available to us and are
subject to certain risks and uncertainties that could cause the
actual results to differ materially from those expressed in any
forward looking statements. Readers are cautioned not to place
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disclaims any obligation to update or revise any such forward
looking statements to reflect new information, events or
circumstances after the date of this publication or to reflect the
occurrence of unanticipated events. MKE and its officers, directors
and employees, including persons involved in the preparation or
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reader is to note that additional disclaimers, warnings or
qualifications may apply based on geographical location of the
person or entity receiving this report. Malaysia Opinions or
recommendations contained herein are in the form of technical
ratings and fundamental ratings. Technical ratings may differ from
fundamental ratings as technical valuations apply different
methodologies and are purely based on price and volume-related
information extracted from Bursa Malaysia Securities Berhad in the
equity analysis. Singapore This report has been produced as of the
date hereof and the information herein may be subject to change.
Maybank Kim Eng Research Pte. Ltd. (Maybank KERPL) in Singapore has
no obligation to update such information for any recipient. For
distribution in Singapore, recipients of this report are to contact
Maybank KERPL in Singapore in respect of any matters arising from,
or in connection with, this report. If the recipient of this report
is not an accredited investor, expert investor or institutional
investor (as defined under Section 4A of the Singapore Securities
and Futures Act), Maybank KERPL shall be legally liable for the
contents of this report, with such liability being limited to the
extent (if any) as permitted by law. Thailand The disclosure of the
survey result of the Thai Institute of Directors Association (IOD)
regarding corporate governance is made pursuant to the policy of
the Office of the Securities and Exchange Commission. The survey of
the IOD is based on the information of a company listed on the
Stock Exchange of Thailand and the market for Alternative
Investment disclosed to the public and able to be accessed by a
general public investor. The result, therefore, is from the
perspective of a third party. It is not an evaluation of operation
and is not based on inside information.The survey result is as of
the date appearing in the Corporate Governance Report of Thai
Listed Companies. As a result, the survey may be changed after that
date. Maybank Kim Eng Securities (Thailand) Public Company Limited
(MBKET) does not confirm nor certify the accuracy of such survey
result. Except as specifically permitted, no part of this
presentation may be reproduced or distributed in any manner without
the prior written permission of MBKET. MBKET accepts no liability
whatsoever for the actions of third parties in this respect. US
This research report prepared by MKE is distributed in the United
States (US) to Major US Institutional Investors (as defined in Rule
15a-6 under the Securities Exchange Act of 1934, as amended) only
by Maybank Kim Eng Securities USA Inc (Maybank KESUSA), a
broker-dealer registered in the US (registered under Section 15 of
the Securities Exchange Act of 1934, as amended). All
responsibility for the distribution of this report by Maybank
KESUSA in the US shall be borne by Maybank KESUSA. All resulting
transactions by a US person or entity should be effected through a
registered broker-dealer in the US. This report is not directed at
you if MKE is prohibited or restricted by any legislation or
regulation in any jurisdiction from making it available to you. You
should satisfy yourself before reading it that Maybank KESUSA is
permitted to provide research material concerning investments to
you under relevant legislation and regulations. UK This document is
being distributed by Maybank Kim Eng Securities (London) Ltd
(Maybank KESL) which is authorized and regulated, by the Financial
Services Authority and is for Informational Purposes only. This
document is not intended for distribution to anyone defined as a
Retail Client under the Financial Services and Markets Act 2000
within the UK. Any inclusion of a third party link is for the
recipients convenience only, and that the firm does not take any
responsibility for its comments or accuracy, and that access to
such links is at the individuals own risk. Nothing in this report
should be considered as constituting legal, accounting or tax
advice, and that for accurate guidance recipients should consult
with their own independent tax advisers.
-
7 January 2014 Page 15 of 16
Venture Corporation
DISCLOSURES Legal Entities Disclosures Malaysia: This report is
issued and distributed in Malaysia by Maybank Investment Bank
Berhad (15938-H) which is a Participating Organization of Bursa
Malaysia Berhad and a holder of Capital Markets and Services
License issued by the Securities Commission in Malaysia. Singapore:
This material is issued and distributed in Singapore by Maybank
KERPL (Co. Reg No 197201256N) which is regulated by the Monetary
Authority of Singapore. Indonesia: PT Kim Eng Securities (PTKES)
(Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock
Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg.
No.0107545000314) is a member of the Stock Exchange of Thailand and
is regulated by the Ministry of Finance and the Securities and
Exchange Commission. Philippines: Maybank ATRKES (Reg.
No.01-2004-00019) is a member of the Philippines Stock Exchange and
is regulated by the Securities and Exchange Commission. Vietnam:
Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is
licensed under the State Securities Commission of Vietnam.Hong
Kong: KESHK (Central Entity No AAD284) is regulated by the
Securities and Futures Commission. India: Kim Eng Securities India
Private Limited (KESI) is a participant of the National Stock
Exchange of India Limited (Reg No: INF/INB 231452435) and the
Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated
by Securities and Exchange Board of India. KESI is also registered
with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708)
US: Maybank KESUSA is a member of/ and is authorized and regulated
by the FINRA Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is
authorized and regulated by the Financial Services Authority.
Disclosure of Interest Malaysia: MKE and its Representatives may
from time to time have positions or be materially interested in the
securities referred to herein and may further act as market maker
or may have assumed an underwriting commitment or deal with such
securities and may also perform or seek to perform investment
banking services, advisory and other services for or relating to
those companies. Singapore: As of 7 January 2014, Maybank KERPL and
the covering analyst do not have any interest in any companies
recommended in this research report. Thailand: MBKET may have a
business relationship with or may possibly be an issuer of
derivative warrants on the securities /companies mentioned in the
research report. Therefore, Investors should exercise their own
judgment before making any investment decisions. MBKET, its
associates, directors, connected parties and/or employees may from
time to time have interests and/or underwriting commitments in the
securities mentioned in this report. Hong Kong: KESHK may have
financial interests in relation to an issuer or a new listing
applicant referred to as defined by the requirements under
Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons
Licensed by or Registered with the Securities and Futures
Commission. As of 7 January 2014, KESHK and the authoring analyst
do not have any interest in any companies recommended in this
research report. MKE may have, within the last three years, served
as manager or co-manager of a public offering of securities for, or
currently may make a primary market in issues of, any or all of the
entities mentioned in this report or may be providing, or have
provided within the previous 12 months, significant advice or
investment services in relation to the investment concerned or a
related investment and may receive compensation for the services
provided from the companies covered in this report.
OTHERS Analyst Certification of Independence The views expressed
in this research report accurately reflect the analysts personal
views about any and all of the subject securities or issuers; and
no part of the research analysts compensation was, is or will be,
directly or indirectly, related to the specific recommendations or
views expressed in the report.
Reminder Structured securities are complex instruments,
typically involve a high degree of risk and are intended for sale
only to sophisticated investors who are capable of understanding
and assuming the risks involved. The market value of any structured
security may be affected by changes in economic, financial and
political factors (including, but not limited to, spot and forward
interest and exchange rates), time to maturity, market conditions
and volatility and the credit quality of any issuer or reference
issuer. Any investor interested in purchasing a structured product
should conduct its own analysis of the product and consult with its
own professional advisers as to the risks involved in making such a
purchase.
No part of this material may be copied, photocopied or
duplicated in any form by any means or redistributed without the
prior consent of MKE.
Ong Seng Yeow | Executive Director, Maybank Kim Eng Research
Definition of Ratings Maybank Kim Eng Research uses the
following rating system:
BUY Return is expected to be above 10% in the next 12 months
(excluding dividends) HOLD Return is expected to be between - 10%
to +10% in the next 12 months (excluding dividends) SELL Return is
expected to be below -10% in the next 12 months (excluding
dividends)
Applicability of Ratings The respective analyst maintains a
coverage universe of stocks, the list of which may be adjusted
according to needs. Investment ratings are only applicable to the
stocks which form part of the coverage universe. Reports on
companies which are not part of the coverage do not carry
investment ratings as we do not actively follow developments in
these companies.
Some common terms abbreviated in this report (where they
appear): Adex = Advertising Expenditure FCF = Free Cashflow PE =
Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To
Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER
= PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ
= Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA =
Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE
= Return On Equity DPS = Dividend Per Share
NTA = Net Tangible Asset ROSF = Return On Shareholders Funds
EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted
Average Cost Of Capital EBITDA = EBIT, Depreciation And
Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per
Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise
Value PBT = Profit Before Tax
-
7 January 2014 Page 16 of 16
Venture Corporation
Malaysia Maybank Investment Bank Berhad (A Participating
Organisation of Bursa Malaysia Securities Berhad) 33rd Floor,
Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603)
2059 1888; Fax: (603) 2078 4194
Singapore Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng
Research Pte Ltd 9 Temasek Boulevard #39-00 Suntec Tower 2
Singapore 038989 Tel: (65) 6336 9090 Fax: (65) 6339 6003
London Maybank Kim Eng Securities (London) Ltd 6/F, 20 St.
Dunstans Hill London EC3R 8HY, UK Tel: (44) 20 7621 9298 Dealers
Tel: (44) 20 7626 2828 Fax: (44) 20 7283 6674
New York Maybank Kim Eng Securities USA Inc 777 Third Avenue,
21st Floor New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax:
(212) 688 3500
Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1,
Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603)
2282 5136
Hong Kong Kim Eng Securities (HK) Ltd Level 30, Three Pacific
Place, 1 Queens Road East, Hong Kong Tel: (852) 2268 0800 Fax:
(852) 2877 0104
Indonesia PT Maybank Kim Eng Securities Plaza Bapindo Citibank
Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190,
Indonesia
Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189
India Kim Eng Securities India Pvt Ltd 2nd Floor, The
International 16, Maharishi Karve Road, Churchgate Station, Mumbai
City - 400 020, India Tel: (91).22.6623.2600 Fax:
(91).22.6623.2604
Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One
& Exchange Plaza Ayala Triangle, Ayala Avenue Makati City,
Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738
Thailand Maybank Kim Eng Securities (Thailand) Public Company
Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama
1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817
(sales) Tel: (66) 2 658 6801 (research)
Vietnam In association with Maybank Kim Eng Securities JSC 1st
Floor, 255 Tran Hung Dao St. District 1 Ho Chi Minh City, Vietnam
Tel : (84) 844 555 888 Fax : (84) 838 38 66 39
Saudi Arabia In association with Anfaal Capital Villa 47, Tujjar
Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah
21352 Tel: (966) 2 6068686 Fax: (966) 26068787
South Asia Sales Trading Kevin FOY [email protected]
Tel: (65) 6336-5157 US Toll Free: 1-866-406-7447
North Asia Sales Trading Alex TSUN [email protected] Tel:
(852) 2268 0228 US Toll Free: 1 877 837 7635
www.maybank-ke.com | www.maybank-keresearch.com