Venture Corporation: A Resilient Contender in Tech Manufacturing

Venture Corporation, one of Singapore’s leading electronic equipment manufacturers, reported a slightly negative financial outlook for its 4Q24 results. The company is expected to post a net profit of S\$59 million, representing a 2.7% decline quarter-on-quarter (qoq) and an 11.6% drop year-on-year (yoy). Despite these figures, the company remains optimistic about re-rating catalysts in FY25-26, including potential new product launches like data-center-related cards and e-cigarettes for the U.S. market.

Key Financial Metrics

• Revenue: S\$2,764 million (2024 forecast), S\$2,995 million (2025 forecast), and S\$3,129 million (2026 forecast).
• Net Profit: S\$243.3 million (2024 forecast), S\$281.3 million (2025 forecast), and S\$297.9 million (2026 forecast).
• Dividend Yield: 5.97% for FY24-26.
• Earnings Per Share (EPS): 0.8385 (2024 forecast), 0.9697 (2025 forecast), and 1.0268 (2026 forecast).

ESG Performance

Venture Corporation maintained a C+ ESG Combined Score. Its involvement in manufacturing e-cigarettes could deter some investors constrained by ethical considerations. Additionally, its carbon emission intensity rose to 26.77 TCO2e/S\$m in 2023 from 25.17 TCO2e/S\$m in 2022. Measures to reduce electricity usage, such as replacing traditional lighting with LED lighting and upgrading air-conditioning systems, have been implemented.

Recommendation

CGS International maintains an “Add” rating for Venture Corporation with a target price of S\$15.30, representing a 21.8% upside potential. However, key risks include supply chain disruptions, labor shortages, and geopolitical concerns.

Benchmark Electronics: A Solid Player with Room for Improvement

Benchmark Electronics, headquartered in the U.S., is not rated (NR) by CGS International. The company posted a market capitalization of US\$1,502 million. Financial projections show a price-to-earnings (P/E) ratio of 17.4x for CY25F and 15.4x for CY26F, with no growth in its recurring ROE, which stands at 7.8%.

Dividend Policy

No dividend yield information is available for Benchmark Electronics, making it less attractive for income-focused investors.

Celestica Inc: A High-Growth Performer

Celestica Inc, another U.S.-based giant, has a strong market capitalization of US\$15,000 million. Its financial metrics indicate significant growth, with a 3-year EPS CAGR of 22.8%. The company boasts a high recurring ROE of 26.7%, with P/E ratios of 26.9x and 22.2x for CY25F and CY26F, respectively.

Notable Strengths

Celestica’s high ROE and growth-oriented approach make it a standout player among its peers. Despite its higher valuation, its growth prospects remain attractive.

Flextronics International: A Mixed Bag

Flextronics International is valued at US\$16,535 million and is not rated by CGS International. The company is grappling with negative EPS growth of -31.3% over a three-year period, reflected in its P/E ratios of 15.4x for CY25F and 13.4x for CY26F.

Key Challenges

Despite a robust recurring ROE of 22.3%, Flextronics faces challenges in reversing its downward EPS trajectory.

Jabil Circuit: High Returns but Facing EPS Declines

Jabil Circuit, with a market cap of US\$18,059 million, offers a high recurring ROE of 65.2%. However, it is hindered by a negative 3-year EPS CAGR of -9.6%. Its P/E ratios stand at 17.9x for CY25F and 15.7x for CY26F.

Dividend Yield

The company has a modest dividend yield of 0.2%, which may not appeal to dividend-seeking investors.

Plexus Corp: Steady Growth with Moderate Valuation

Plexus Corp reported a market capitalization of US\$3,816 million. The company has a 3-year EPS CAGR of 11.5%, with P/E ratios of 20.5x for CY25F and 18.1x for CY26F. Plexus does not disclose a dividend yield, which may limit its appeal to income-focused investors.

Sanmina-SCI Corp: A Value-Oriented Contender

Sanmina-SCI Corp is valued at US\$4,690 million. Its recurring ROE stands at 14.2%, with a favorable P/E ratio of 14.9x for CY25F. However, no growth metrics or dividend yield details are provided.

Opportunities and Considerations

The company’s relatively lower valuation makes it an attractive option for value investors, although the lack of growth metrics might be a concern.

Conclusion

The tech manufacturing sector presents a diverse array of opportunities and challenges. Venture Corporation stands out as a resilient player with strong fundamentals, despite short-term challenges. Meanwhile, Celestica Inc showcases high growth potential but trades at a premium valuation. Other players like Jabil Circuit and Flextronics grapple with declining EPS growth, while Sanmina-SCI and Benchmark Electronics appeal to value-oriented investors.

CGS International provides a comprehensive analysis of these companies, emphasizing the importance of understanding individual financial metrics, ESG considerations, and market trends when making investment decisions.