Venture, Hi-P and ThaiBev win on earnings growth, share price gain and ROE respectively
For all the competition from low-labourcost locations, manufacturing remains a key pillar of Singapore’s economy. Astute manufacturers in the city state have long managed costs by setting up operations outside Singapore, while maintaining headquarter functions here and finding new ways to add value to their customers.
Venture Corp, this year’s overall winner in the manufacturing sector — and also the overall winner of the Billion Dollar Club 2019 — is a prime example. Instead of just assembling electronic products on behalf of its clients, the company, under chairman and CEO Wong Ngit Liong, has increased the range of services it can offer, from design and R&D to supply chain management and even technical support.
The company is also very careful not to be too exposed to a single industry sector or customer. It believes that having a diversified customer base will help it weather industry volatility. Venture makes products used in the following industries: life science, genomics, molecular diagnostics, medical devices and equipment, healthcare and wellness technology, lifestyle consumer technology, health improvement products, instrumentation, test and measurement technology, networking and communications, fintech, as well as computing, printing and imaging technology.
It has a portfolio of more than 5,000 products and is constantly developing new ones with its customers and business partners. Within the Fortune 500 corporations, more than 100 have business dealings with Venture.
In recent years, Venture’s strategy has paid off handsomely, as its earnings enjoyed broad-based growth. In FY2015, it chalked
up earnings of $154 million. The figure more than doubled to $370.1 million in FY2018. This compound annual growth (CAGR) rate of 33.9%, given Venture’s scale, is rare. Venture is the top scorer in this year’s BDC’s profit after tax growth category, and that caused it to be the sector’s overall winner.
To be sure, in recent quarters, the company is seeing a slowdown, as the US-China trade war caused plenty of economic uncertainty. Yet, it has managed to surprise and show its resilience. For 2Q ended June 30, Venture reported earnings of $90.8 million, down 7.3% y-o-y, instead of the double-digit drop many investors had feared. Revenue fell 5.1% y-o-y to $903.5 million.
The company was able to show strong operating cash flow, which increased $113.3 million, or 17.5% y-o-y. It is paying an interim dividend of 20 cents a share — same as in FY2018. Previously, shareholders could look forward to dividends only once a year.
Apart from Venture, Hi-P International is another Singapore-listed contract manufacturer that has scored well. With a shareholder return CAGR of 55.7% over the three-year period of evaluation, Hi-P led its manufacturing peers in this category.
Under executive chairman Yao Hsiao Tung and his wife, executive director and chief administrative officer Wong Huey Fang, Hi-P grew from a tooling specialist into one of the region’s largest manufacturing service providers. It has 12 plants in China, Poland, Singapore and Thailand, as well as marketing and engineering support centres in China, Singapore, Taiwan, Germany and the US. Hi-P’s clients include many of the world’s biggest names in mobile phones, tablets, household and personal care appliances, computing and peripherals, the internet of things and medical and industrial devices.
For the most recent 2Q ended June 30, the company’s revenue fell 5.2% y-o-y to $286.4 million. Yet, earnings increased 16.9% y-o-y to $14.4 million, as the company was able to improve on cost management while making products that could command a higher margin.
Hi-P is not immune to the fallout from the trade war, but Yao is pushing the company to adapt and explore M&A deals to grow further. “We have diagnosed our situation and believe that we have figured out the right prescription. We believe that tough situations do not last, but tough companies do. We will strive to grow bigger and stronger,” he says in the company’s 2QFY2019 results announcement.
Meanwhile, it was not only the electronics manufacturers that had a good showing.
Thai Beverage Public Co, maker of Chang beer, recorded a return on equity of 20.01% over the three-year period of evaluation. The Thailand-based beverage manufacturer scored highest in this category.
The company was listed on the Singapore Exchange in 2006, but it made the local investment community sit up and take notice when it acquired Fraser and Neave in 2012. ThaiBev further expanded its regional footprint across Asean with acquisitions in Myanmar and Vietnam.
For 3Q ended June 30, ThaiBev grew its sales by just 3.3% y-o-y to THB62.7 billion ($2.84 billion). Slower sales of beer offset the increase in sales of spirits and non-alcoholic beverages and food. In the same period, earnings grew 27.1% y-o-y to THB7.7 billion. Earnings growth outpaced revenue growth because of improved margins across its various main products. ThaiBev’s food manufacturing business, in particular, improved its net profit by 270% in this period.