+ Improvement in net cash position. Net cash has improved by S$105mn YoY in 1Q23 to S$920mn. The high-interest rate environment with fixed deposit rates at 4% to 5% will be supportive of earnings this year.
– Inventory elevated ahead of slowdown. Venture exited 1Q23 with an inventory of S$1.017bn (1Q22: S$1.152bn). Annualised inventory days are around 138 days vs pre-pandemic average of 100 days. We believe there is excess inventory ahead of the coming slowdown in revenue.
– Revenue shrinking again. After enjoying revenue growth for the past five consecutive quarters, 1Q23 fell by 7.6% YoY. Our initial expectation was a modest 5% improvement in revenue for FY23e. However, the slowdown in the macro environment is causing revenue to fall sharper than expected. Venture is still finding difficulty crossing the record revenue of S$4bn achieved in FY17.
Weakness in demand is across most sectors. Venture has performed better in instrumentation, life science and consumer luxury. Areas of future growth include electric vehicles and life sciences. To grow market share, Venture can migrate certain products out of China to SE Asia or help in the redesign of products. Demand is expected to remain weak in the near term as customers are cautious about their orders.