Slightly below expectations. FY08 turnover inched down 2.3% to S$3,784.1m although it would have increased by 4.6% in US$ terms. Net profit fell 44.6% to S$167.5m and was below our forecast and market consensus (according to Bloomberg data) of S$215.2m and S$192.1m respectively. This discrepancy was mainly due to Venture's CDO charges which had also brought 4Q08 net earnings down by 93.8% to S$4.6m. If not for the charges, earnings would have come in at S$68.5m and S$287.5m in 4Q08 and FY08 respectively.

Weakening macro outlook. While management has admitted that it would be affected by the present economic slowdown and has termed it a "dull year", the company also highlighted that it is moving away from the EMS space and venturing further into the higher-margined segment within the ODM division through the likes of engineering design and other initiatives. Additionally, Venture mentioned that it would continue to look to increase its market share.

However, certain customers are not doing well. Nevertheless, we believe that Venture would find it hard to advance against a rising tide. HP's recent financials saw printer unit shipments fall 33% while its profit guidance for 2Q09 was also below analysts' expectations. Additionally, Agilent also warned of widespread market weakness as orders for its Electronic Measurement business fell 28% with weak demand seen from the various MNCs.

Recommendation. We forecast Venture's core earnings (excluding the potential CDO charges) to decrease 24.4% to S$217.3m in FY09. While the macro picture of the company may have taken a step back, its valuations appear highly attractive with prospective dividend yield at 12.1% (which we believe is sustainable given Venture's cash generating abilities) and 4.8x FY09 P/E. Assuming Venture trades up to the industry average of 6.0x FY09 P/E, we maintain BUY with target price of S$5.15 (from S$7.40 previously).