What does the company do?
Singapore listed Venture Corporation is a leading global electronics manufacturing services (EMS) provider, supplying components and services to customers in diverse end markets all over the world, spanning across several growth industries including healthcare, life sciences, 5G infrastructure and advanced payment services.
Why do we like the investment?
Although Venture began as a simple EMS business, over several decades, they have moved to become a value-add supplier with their own research and development patents and knowledge. Many of their customers have been working with Venture for over a decade and during that time, Venture has become increasingly embedded into their customers’ value chain. This recurring revenue supports better pricing negotiations and Venture’s operating margin reflects the strength of this business moat relative to simple EMS peers. A focus on low volume, small batch manufacturing with high margin with greater design collaboration with customers has underpinned good cashflow generation and a healthy balance sheet that has a net cash position. Last year Venture bucked the global trend by raising dividends per share.
2020 has thrown up new opportunities for Venture. The pandemic created new demand for ventilators as well as testing and diagnostics equipment which are essential services that saw significant volume increase through the year. Another source of demand growth was the global trend to diversify supply chain risk as a result of trade frictions, particularly between the US and China. Venture has production facilities located in Singapore, Malaysia, USA, Europe and China. This manufacturing footprint enabled flexibility across their network when different regions faced lockdown restrictions and it attracted new customers looking to diversify their supply chain outside of China.
Looking ahead, Venture is poised to further broaden their exposure to high growth industries with disease treatment devices for top-tier hospitals as well as wafer testing equipment for the big semiconductor players. As long term shareholders in the business, we have been engaging on Board diversity and supply chain control measures. Recently the company have refreshed the Board and improved disclosure around executive pay which has resulted in an upgrade to their MSCI ESG rating.
© owned by each of the corporate entities named in the respective logos. Companies selected for illustrative purposes only to demonstrate Aberdeen Standard Investments’ investment management style and not as an indication of performance.
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