VSTECS Sustains Growth Momentum

VSTECS maintains resilient growth as strong ICT demand, higher product ASPs and robust AI pipeline support earnings despite project delays.

VSTECS Sustains Strong Growth

VSTECS Berhad continues to demonstrate resilient execution, with quarterly revenue exceeding RM1 billion for the third consecutive quarter, reinforcing confidence in its earnings outlook. The group’s core 1H26 earnings rose 20% year-on-year to RM46 million, accounting for 39% of the full-year forecast and remaining broadly in line with historical seasonality.

Growth was broad-based across all three business segments. ICT Distribution revenue increased 28% year-on-year, Enterprise Systems surged 59%, while ICT Services grew 9%, reflecting healthy demand from both commercial and public sector customers.

The stronger contribution from higher-margin enterprise businesses also supports an improving earnings mix and greater revenue visibility.

Elevated memory prices are expected to remain a net positive for VSTECS despite risks to consumer affordability. Customers have brought forward purchases ahead of further price increases, while higher component costs have translated into higher product average selling prices, more than offsetting softer unit demand.

With computing devices becoming increasingly essential, any purchasing delays are likely to be temporary.

AI remains the group’s biggest medium-term catalyst. Management highlighted robust AI enquiries, with the project pipeline reaching hundreds of millions of ringgit. However, deployment remains constrained by data centre availability rather than demand.

Given the lumpy nature of enterprise projects, forecasts remain unchanged, with AI and data centre-related businesses expected to contribute about 16% of FY26F revenue.

VSTECS also benefits from its extensive reseller network, broad portfolio and relationships with more than 50 global technology principals. Its regional group scale provides procurement leverage and access to new technology cycles, strengthening its competitive position.

The company remains exposed to memory shortages, public sector project delays and supply-chain disruptions. Nevertheless, its growing exposure to enterprise, cloud and data-centre opportunities should help offset near-term weakness in consumer hardware.

The investment view remains positive, with a BUY recommendation and bonus-issue adjusted target price of RM2.40 per share, based on a 16x multiple applied to blended CY27/28 EPS.

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