Here's why Venture should snub dividend woes

Investors shouldn't worry about acquiring the S$38m-worth Ang Mo Kio Avenue 5.

According to OCBC, Venture Corp announced that it has entered into a Put and Call Option Agreement for the acquisition of Block 5006 Ang Mo Kio Avenue 5, Techplace II (leasehold interest of ~40 years). The total consideration amounts to S$38m and would be funded by internal resources.

Here's more from OCBC:

This block is a flatted factory building, has a GFA of 18,018 sqm and is currently used as VMS’s headquarters for its operations and business activities. The acquisition is still subject to regulatory approval. We believe that one of the main questions that investors have is whether VMS would lower its DPS for FY12 as a result of this capex.

We opine that this is unlikely as VMS is in a strong net cash position of S$227.4m as at 30 Jun 2012. Even with this acquisition, we estimate that VMS would still be able to generate FCF of S$109m in FY12. This proposed acquisition is not expected to have any material impact on its EPS and NTA/share in FY12.

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