VSTECS ready for another uptrend

VSTECS Bhd appears to be heading for a continued uptrend. Investors’ interest in the counter may stem from its better financial performance.

The information and communications technology (ICT) products distributor posted a 53.79% year-on-year increase in net profit for the third quarter. The better results were driven by a record-high revenue.

Net profit for the three months ended Sept 30, 2024 (3QFY2024) rose to RM19.58 million from RM12.73 million a year. The higher earnings were also due to a 66% reduction in financial instrument impairments to RM434,000 from RM1.28 million.

It saw a 53% fall in tax expenses to RM6.92 million and a 63% rise in share of associate profit to RM1.3 million. Quarterly revenue reached a record high of RM841.76 million, up 30.22% from RM646.41 million in 3QFY2023. This was due to a recovery in both consumer and enterprise products as well as new product launches.

For the first nine months of FY2024, VSTECS’ net profit grew 13.67% to RM49.13 million from RM43.23 million year earlier. It was boosted by revenue, which climbed 8.47% to RM2.08 billion from RM1.92 billion.

VSTECS’ ICT distribution segment, the replacement cycle for devices bought during the pandemic has just begun in the second half of this year, aligning well with the rollout of AI-enabled notebooks. This convergence is expected to drive higher demand and sales volumes into next year.

In the enterprise systems segment, VSTECS witnessed increased orders for AI-related data centre (DC) equipment, which carries a higher value than traditional servers.

The company has seen major public sector projects revived and are hopeful for more to roll out next year. The AI and DC revolution, along with new public sector projects, provides a strong foundation for its enterprise business.

Meanwhile, it expects continued growth of the ICT services segment, supported by rising demand for cloud-based solutions and digital transformation across sectors.

VSTECS said that as of Sept 30, its net cash position was RM111.1 million, positioning the group well to pursue organic and inorganic growth opportunities.