From the recent results announcements, HP's guidance is below analyst forecast and Agilent expects a YoY decline in sales in FYQ109.However, we believe Venture has worked closely with these key clients on rapidlygrowing new products such as HP’s multi-function printers and wireless printersand could benefit from a potential increase in outsourcing..

Venture’s Q3 inventory level increased 10% over Q2 on flat QoQ sales growth andcaused some investor concern. Our checks suggest this is due to Venture’scontinuing efforts in expanding ODM activities and the company’s unique highmix/low volume business model.

While the inventory turnover days rose from 33 in 2004 to 67 in 2007, gross/EBITmargin improved from 16.8%/5.5% in 2004 to 20.4%/6.7% in 2007. We believethese two factors should help Venture deliver more defendable profit margins thanother EMS companies with high consumer electronics exposure such as Hon Hai.This is because Venture’s broader product portfolio and unique design servicescould be difficult for its rivals to replicate.

In light of Venture’s strong cash position, and historically low P/BV, we maintainour Buy rating and price target of S$9. Our DCF-based price target is based on6.0% EBIT margin, 3.2%/3% medium-term/terminal growth, and a WACC of8.6%.