Strong demand for consumer products — Venture saw more orders for “capexlight” products as many firms are still not willing to commit high capex. Printing & Imaging (P&I) (being closest to the consumer electronics segment despite serving corporate customers) saw a substantial QoQ revenue increase, while Test & Measurement (which involves huge customer capex) saw QoQ revenue contraction. Visibility remains poor as customers are still “not prepared to commit to the pace and trajectory of recovery”. Inventory channels remain very lean.
Gaining new customers — Venture added 7 new customer accounts recently across various industries including Medical, Aerospace, Instrumentation, and Printing & Imaging. The strategy is to increase revenue contribution from ODM and compensate for any potential loss of a major customer in P&I.
Expanding margins — Mgmt says P&I revenue improved significantly QoQ due to the shift towards turnkey for a major customer which was difficult to turn away. However, going forward, much emphasis will be placed on shifting existing and new customer accounts’ product mix away from ESP (~15% gross margin) towards ODM (18-25% gross margin) and Enterprise Solutions (>40% gross margin) to capture wider margins. VIP Color printer developed with HP was cited as an example of an Enterprise Solution that was highly profitable.
Cash conversion cycle and dividends — Management says there is little room for further cash cycle reduction as working capital has been substantially lowered, including a 15% qoq reduction in inventory. Management has reiterated FY09E DPS of S$0.50 given strong +FCF of the Group. Management remains very cautious on possibility of full CDO write-back and says future write-backs are uncertain given the nature of the financial product.
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