VETECE Holdings Bhd (VTC, 0319) primarily operates within the Information Technology (IT) sector. The company offers a comprehensive range of enterprise IT solutions, including implementation services, maintenance, support, professional services, and the resale of hardware and software. VTC collaborates with leading technology partners such as Oracle, WSO2, and Salesforce to deliver cutting-edge solutions to various industries, including telecommunications, financial services, and technology. The company serves a diverse client base across the Asia Pacific region. We expect VTC to register net earnings of RM6.6m and RM9.2m for FY8/24 and FY8/25, respectively. BUY with a FV of RM0.47 based on 20x (PER of its peers at similar market capitalisation) over FY8/25 EPS.

VTC is set to increase its production capacity by investing in state-of- the-art machinery and equipment. The company is concentrating on expanding its enterprise IT solutions portfolio, with a focus on AI- driven data handling and analytics. Moreover, the creation of a Centre of Excellence (COE) for software solutions is a key strategic move that will enhance their ability to offer advanced technology services. This expansion is projected to boost the company’s annual production capacity by 30%, allowing it to meet rising demand and enter new markets.

Additionally, VTC is expanding into new markets in SEA, particularly Indonesia and Vietnam, to diversify its revenue stream. The company is also developing new sustainable and energy-efficient product lines to meet the rising demand for environmentally friendly industrial solutions, which will boost its competitiveness and market share.

The IT services industry in Malaysia is poised for significant growth, driven by the increasing adoption of digital transformation initiatives across various sectors. Despite operating within a competitive landscape, VTC benefits from growing demand for advanced IT solutions, particularly in the telecommunications and financial services sectors. The company's strong track record in providing enterprise IT solutions enables it to capitalize on the expanding market. The integration of AI and data analytics into their offerings further enhances their competitive edge, allowing them to meet the evolving needs of their clients.

Given its strong market position, robust financial status, and strategic expansion plans, VTC is well-positioned to capitalize on the growth opportunities in the industrial equipment and services sector, both in Malaysia and the SEA region. The company’s financial leverage is manageable with net gearing of 0.25x as of FY23. We expect this level to remain post-IPO as most of the proceeds will be utilised for business expansion.

Source: Rakuten Research - 28 Aug 2024

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