Venture Corporation (VMS SP): Focused Growth and Optimistic Outlook

Recommendation: BUY (Maintained)

Target Price: S\$15.55

Upside: +22.3%

Venture Corporation, a global leader in electronics services and technology solutions, remains steadfast in its strategy to grow its differentiating capabilities. This focus has allowed the company to evolve from traditional printing products to high-value life sciences offerings, becoming a trusted partner during product development stages.

Strategic Agility Amid Trade Diversions

VMS is well-positioned to capitalize on opportunities arising from trade diversions. The company supports its clients in sourcing components outside of China, mitigating geopolitical risks. Additionally, VMS has demonstrated its adaptability by modifying products to address semiconductor shortages. Despite shifting manufacturing trends, most of VMS’ clients still view China as a vital market.

Growth Opportunities Across Domains

VMS identifies multiple growth avenues in sectors such as AI data centers, semiconductor equipment, life sciences, and lifestyle consumer technology. Specific opportunities include:

• AI Data Centers: Power management and networking equipment, along with advanced chip requirements, drive growth.
• Semiconductor Equipment: Collaborations with two of the top four global semiconductor equipment companies open new opportunities.
• Life Sciences: Renewed focus on cancer research post-COVID-19, with VMS securing new projects in medtech.
• Lifestyle Consumer Technology: As clients consolidate their supplier base and launch new products, VMS aims to capture increased business.

Financial Outlook

VMS reported a net profit of S\$270 million in 2023, with expectations of a recovery in 2025 (+8% YoY). The company maintains a healthy balance sheet with net cash of S\$1.2 billion (about 30% of its market cap) and a consistent dividend yield of 5.9%. Despite a challenging environment, VMS is trading at an attractive 14x 2025F PE (9x ex-cash PE).

Key Financial Metrics

• Net Turnover (2024F): S\$2.75 billion
• EBITDA Margin (2025F): 11.1%
• Net Margin (2025F): 9.2%
• ROE (2025F): 9.2%

With a strong focus on innovation, agility, and customer-centric solutions, Venture Corporation remains a compelling investment opportunity.

Peer Companies: Detailed Financial and Strategic Analysis

Agilent Technologies (A US)

Market Cap: US\$42.1 billion

Agilent operates in the life sciences and diagnostics space, with projected 2024 and 2025 PE ratios of 33.2x and 26.3x, respectively. The firm boasts a robust ROE of 24.5%, but its dividend yield remains modest at 0.7%.

Broadcom (AVGO US)

Market Cap: US\$1.11 trillion

Offering a diverse range of semiconductor solutions, Broadcom trades at a high PE of 187x (2024) but remains a market leader with a remarkable ROE of 39.7% and a dividend yield of 1.0%.

Fortive Corporation (FTV US)

Market Cap: US\$27.4 billion

Specializing in industrial technology, Fortive features a competitive PE of 20.5x (2024) and 19.1x (2025), with a focus on steady growth and innovation.

Illumina (ILMN US)

Market Cap: US\$21.7 billion

Illumina, a leader in genomics, is projected to trade at 33.1x (2024) and 30.9x (2025) PE. Despite a lack of dividend yield, the company maintains a strong ROE of 20.5%.

Keysight Technologies (KEYS US)

Market Cap: US\$28.7 billion

Operating in the fields of electronics and instrumentation, Keysight exhibits a PE of 46.9x (2024) and 23.9x (2025). While its dividend yield is negligible, its ROE stands solid at 20.0%.

KLA Corporation (KLAC US)

Market Cap: US\$101.3 billion

KLA, a semiconductor equipment leader, demonstrates a high ROE of 102.4% and dividend yield of 0.8%. Its PE ratios for 2024 and 2025 are 37.1x and 25.2x, respectively.

Lam Research (LRCX US)

Market Cap: US\$103.3 billion

Lam Research, another semiconductor giant, is projected to trade at 27.6x (2024) and 22.8x (2025) PE. It offers a 1.1% dividend yield and an impressive ROE of 49.7%.

Medtronic (MDT US)

Market Cap: US\$112.9 billion

Medtronic, a medical device leader, has a balanced performance with PE ratios of 16.1x (2024) and 15.1x (2025). It offers a strong dividend yield of 3.2% and an ROE of 14.0%.

Philip Morris (PM US)

Market Cap: US\$189.1 billion

As a global tobacco leader, Philip Morris trades at a relatively low PE of 18.7x (2024) and 17.2x (2025), with a significant dividend yield of 4.5%, although it reports a negative ROE of -145.2%.

Thermo Fisher Scientific (TMO US)

Market Cap: US\$214.1 billion

Thermo Fisher, a life sciences giant, commands PE ratios of 25.8x (2024) and 24.2x (2025). Despite a low dividend yield of 0.3%, its ROE is a respectable 15.5%.

Trimble (TRMB US)

Market Cap: US\$18.4 billion

Trimble, focused on GPS and software solutions, trades at a PE of 26.4x (2024) and 25.7x (2025). The company does not offer a dividend but maintains an ROE of 11.8%.

Conclusion

Venture Corporation stands out as a compelling investment, driven by its differentiated capabilities, focus on innovation, and financial strength. While its peer companies present strong individual merits, VMS’ balance of growth opportunities, agility, and dividend consistency makes it a standout performer in its sector.