4 Stocks This Week (Technology) [22 June 2018] – Venture Corp; Silverlake Axis; Creative Technology; Valuetronics
On Wednesday, the tech-centric NASDAQ composite index in the United States closed at a record high of 7781.51 points. While some market experts warned about similarities to the 1990s dot-com bubble, investors have continued to pile into tech stocks. The NASDAQ has increased 11.4% year-to-date, with tech giants like Amazon, Facebook and Cisco seeing double-digit gains so far this year.
Investors have many reasons to be optimistic about the future of tech stocks, as the US continues to strive towards becoming the global leader in 5G technology. In 2017, an Accenture report projected that 5G could add 3 million new jobs and increase the US GDP by US$500 billion.
On 20 June, Education Minister Ong Ye Kung, who is a board member of the Monetary Authority of Singapore, announced the government’s target to reduce cash usage and make Singapore a cheque-free country by 2025 through embracing online payment platforms.
This will help reduce the cost of processing cash and cheques, which stood at 0.52% of Singapore’s GDP, or $2 billion according to a 2016 KPMG report. Technology companies are expected to be huge beneficiaries from this latest Smart Nation push.
After generating a median return of 93% last year, Singapore’s ten biggest technologies stocks recorded an 8% median decline year-to-date (YTD).
For this week’s edition of 4 Stocks This Week, we will take a look at four of the largest technology companies listed on the SGX.
Venture Corporation (SGX: V03)
Venture is a global provider of technology products and solutions, particularly well-known for its capabilities in original design manufacturing. Venture is also Singapore’s largest Technology Assembly, Products & Distribution stock
Venture had been a stock heavily favoured by investors for generated a staggering 115% return in 2017.
However, in recent months, Venture’s share price has been battered by short-sellers. In April, a group of bloggers called Vailant Varriors alleged that Venture Corp was overly exposed to Philip Morris. Previously, Philip Morris reported weak sales of its IQOS heated tobacco products, which includes products like e-cigarettes.
This caused Venture’s share price to nosedive by over 30% in just eight days, before climbing 12% the following week as the company increased its buybacks.
After this tumultuous period, American investment firm Blackrock announced on 15 May that it had sold $8.3m of Venture stock, reducing its Venture stake from 5.11% to 4.97%, which meant Blackrock was no longer a substantial shareholder. Venture’s share has declined by 7.1% YTD.
With a current market cap of $5.19 billion, Venture Corp closed at $18.06 per share this week.
Silverlake Axis (SGX: 5CP)
Silverlake Axis is a fintech company which develops solutions for the Banking, Insurance, Retail, Payment and Logistics industries.
For the quarter ended 31 March 2018, Silverlake Axis recorded revenue growth of 2% to RM126.7 million ($43 million), while gross profit increased by 6% to RM71.5 million ($24.3 million). This arose mostly due to higher revenue from software licencing, which jumped 444% to RM9.8 million ($3.3 million) and higher revenue from software project services, which increased 150% to RM9.4 million ($3.2 million).
However, with a steep decline in other income and increase in administrative expenses, net profit attributable to shareholders fell 93% to RM29.0 million ($9.8 million).
As of June 7, acting on its buyback resolution of 26 October 2017, Silverlake has repurchased 176,390,400 shares, or 6.66% of its outstanding shares. Despite the buybacks, Silverlake Axis stock is down by 8.1% YTD.
With a current market cap of $1.38 billion, Silverlake Axis closed at $0.52 per share this week.
Creative Technology (SGX: C76)
2018 has been a good year for Creative Technology. In February, Creative announced that it would be introducing the Super X-Fi, a dongle which enables every headphone to deliver a cinema-quality audio experience.
This revolutionary product saw its share jump to record levels not seen since 2007. To promote the product before its official launch in Q3 2018, Creative introduced the Super X-Fi to hundreds of live-streaming ‘influencers’ at the Computex trade show in Taiwan.
In May, Creative was awarded an additional $2.3 million in fresh damages in its lawsuit against Huawei, on top of $36 million awarded in August 2017. Given that the judgement is final, Creative expects to recognise US$32 million in income from legal proceedings for Q2 2018.
With this string of good news, Creative Technology bucked the trend of falling tech stocks. Its share price has skyrocketed by 428% YTD.
With a current market cap of $398.8 million, Creative Technology closed at $5.67 per share this week.
Valuetronics Holdings (SGX: BN2)
Valuetronics is an integrated electronics manufacturing services provider headquartered in Hong Kong.
For the fiscal year ended 31 March 2018, Valuetronics saw its net profit for the year jump by 32.9% to HK$204.7 million ($35.4 million). This was largely due to a 41.6% increase in revenue from Consumer Electronics to HK$1.4 billion ($242.3 million), due to increased demand for consumer lifestyle products and smart LED lighting products with smart Internet of Things (“IOT”) features.
In their annual report, Valuetronics is bullish on the growth prospects of its consumer lifestyle products as its customers continue to launch new products and improve their penetration in the Chinese market. However, Valuetronics also expects that it will continue to grapple with supply chain challenges like rising raw materials prices and extended procurement lead times.
Despite an increase in net profit, its stock has taken a beating, declining 23.6% YTD.
With a current market cap of $300.3 million, Valuetronics Holdings closed at $0.70 per share this week.