SINGAPORE (Sept 16): For all the competition from low-labour-cost 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 result 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 the full list, go to bdc.theedgesingapore.com
CENTURION CLUB: MANUFACTURING
China Sunsine focuses on sales to offset ASP drop
China Sunsine Chemical Holdings was listed on the Singapore Exchange in 2007. It is a leading speciality rubber chemicals producer that sells accelerators, antioxidant and vulcanising agents and serves more than 65% of the world’s 75 largest tyre makers, including brands such as Bridgestone, Michelin, Goodyear and Pirelli.
FY2018 ended Dec 31 was a good one for the company. In the final quarter, China Sunsine’s sales volume reached a record high of 39,957 tons, 3% higher than the previous year. While the sales volume of accelerators remained flat, that of other products such as antioxidants increased. In total, China Sunsine sold a record 151,486 tons of products, a 7.8% increase from the preceding year. Average selling prices (ASPs) increased as well.
For FY2018, the company reported earnings of RMB641.3 million ($124.2 million), up 88% over FY2017. Revenue in the period was RMB3.3 billion, an increase of 20% y-o-y. The company paid a dividend of 5.5 cents a share in FY2018 — a seven-year high. In FY2017, China Sunsine paid 2.5 cents a share.
China Sunsine was also able to maintain its sales momentum in the current financial year. While it delivered record volume, it suffered from lower ASPs. For 2Q ended June 30, the company reported earnings of RMB155.8 million, down 35% y-o-y. Revenue was RMB727 million, a drop of 17% y-o-y.
Despite the earnings decline, executive chairman Xu Cheng Qiu was “gratified” with the most recent set of earnings numbers. “The group will aim to continue increasing its sales volume,” he says. Its strategy to increase market share is to boost production and sales volume.
