Lively R&D could offset Venture’s production weakness

Its R&D could sustain its elevated activities in the coming quarters.

Venture’s production weakness could get a lift from the firm’s reasonable research and development (R&D) projects, UOB Kay Hian (UOBKH) said.

“Given the cost-plus model, Venture has some degree of control that may help offset weakness on the production front,” the research firm said. “We expect R&D expenses to remain elevated in the coming quarters.”

Moreover, the firm’s slowing growth could be offset by its test and measurement/Med (T&M/Med) segment.

Also read: Philip Morris’ low-profit warnings put heat on Venture

“The broad read across the financial results of firm’s clients is slowing growth, with some slipping into negative growth,” UOBKH noted. “Stronger growth from clients in the T&M/Med segment helps offset this slowdown although it remains difficult to believe they can drive H2 2018 earnings to outperform on a YoY basis.”

For the second quarter of 2018, Venture Corporation’s profits jumped 40.2% to $97.91m from $69.84m last year. However, revenue dipped 6% to $952.28m from $1.01b.

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