We expect 4Q08 revenue to have fallen 5% yoy to $913m, bringing full year revenue to $3.79b, down 2%. If Venture decides to write off its remaining CDO exposure of $90.7m once and for all,full year net profit is forecast to be $112.5m (implying a 4Q loss of $51m). Excluding any mark-to- market, our full year forecast will be $199m implying 4Q profit of $36.7m, down 51% yoy. Its equity stake in DMX (investment cost $82.5m) could also be impaired but has not been assumed in our forecast.

In 3Q08, Venture’s inventory surged 13% yoy and 10% qoq to $680m or 64 days, the highest quarter since 2005. A continued climb in 4Q08 will signal worse yet to come, which could suggest potential inventory write-offs in future. However, we understand that Venture is cognizant of this risk and has switched to generic raw materials where possible.

Revenue is forecast to fall 11% in FY09. The lower consumer spending in the US has led to record store closures among chains such as Circuit City and Macy’s. This will surely hit Venture’s Retail Store Solutions & Industrial Products business and we have assumed the greatest decline in this segment. Earnings however are expected to be rise 4% from our FY08 pre-MTM forecast, driven by lower costs.

Although Venture’s CDOs will mature in Dec 2009, we have not assumed any write-backs of provisions in FY09 or FY10. To-date, it has accumulated $75m in mark-to-market provisions (excluding any further MTM charges in 4Q08). As at Sep 2008, it has provided for 54% of the original host value of $167.8m.

Based on our pre-MTM FY08 forecast of $199m, Venture currently trades at 5.6x, below the sector average of 7.0x. However, we do not think the stock is undervalued. We note that our forecast is lower than consensus of $231m, which seems rather high given that 9M08 profit was only $162m, implying a tall order profit of $72m in 4Q08. As such, we reckon the stock is already fairly priced. Maintain Hold.