Company Background. VSTECS is a leading distribution hub for Information and Communication Technology (ICT) products in  Malaysia. The group distributes a comprehensive range of ICT products comprising notebooks, personal computers, smartphones,  tablets, printers, software, network, and communication infrastructure, servers and enterprise software from more than 40 leading  principals. It operates under 3 main business segments: ICT Distribution, Enterprise Systems, and ICT Services. 

Investment Highlights. (i) Focus on Malaysia’s digital transformation imperatives by expanding range of product offerings to include  new areas such as power solutions for data centres and other critical infrastructural sectors. (ii) Further explore products to support  the renewable energy industry, such as EV power accessories and energy storage to meet the evolving needs of the market. (iii) Digital technologies such as big data, cloud computing, cybersecurity and artificial intelligence will lead to the demand and growth for  Enterprise Systems and ICT Services segments.

Financial Performance. In 1QFY23, VSTECS posted a higher revenue of RM664.7mil (+3.3% YoY) with a PAT of RM14.8mil (+25%  YoY) due to higher sales from Enterprise Systems and ICT Services segments, mainly driven by continuous upgrades of enterprise  digital infrastructure.

Technical Analysis. VSTECS broke out from its 2-week rectangle pattern with a long white candle a few sessions ago, implying that  a bullish reversal sign may have occurred. With the 20-day EMA remaining above the 50-day EMA since the bullish crossover in midSep22, the uptrend may continue in the near term. A bullish bias may emerge above the RM1.36 level, with a stop-loss set at RM1.25,  below the 50-day EMA. Towards the upside, near-term resistance level is seen at RM1.50, followed by RM1.60. 

Source: AmInvest Research - 22 May 2023