$VSTECS / 5162 (VSTECS BERHAD) sharing from my remiser uobkh

♨️ Fresh From Oven ♨️

VSTECS 2QFY24 briefing keytakes (Zoom)

Date: 15 Aug 2024

Management: Mr Soong (CEO), PC Chan (CFO), LC Foo (CIO), Sandy (iBES Advisory)

Key takeaways
- 1H24 revenue of RM1.24b and PAT of RM29.6m which is comparable with last year despite lower public sector projects.
- new distributorship recently: StarSentry with LGMS to enhance SME cybersecurity, Google Pixel smartphones (sole distributor), imminent launch of Starlink Mini in US and more strategic enterprise brands coming.
- won multiple top tier awards with key vendors in the first six months of the year including Cisco, DELL, Huawei, HPI, HPE and IBM.


ICT distribution
- ICT distribution: growth 30% yoy and 2% qoq. PC market grew by 3% in 2Q24 after eight quarters of decline. More AI enabled devices launched to address the increasing demand for tools that enhance productivity and creativity.
- Starlink has been consistently shipping thousands of units per month – upcoming mobile version is widely anticipated and will reach a new market segment (Starlink Mini). Price fluctuation: Starlink standard kit (RM2.3k) got 50% promotion recently and may have this promotion again in coming weeks.
- Google Pixel 9 arrives in Malaysia after eight years with VSTECS being sole distributor.
- The share of AI capable PCs among total PC shipments is forecast to grow from 19% in 2024 to 60% by 2027 (Statista).

Enterprise systems
- public sector project delays persist with mega projects still om hold.
- integration with VMWARE ‘team is in progress.
- private sector enterprise spending on digital infra remains stable, with AI-driven cloud transformation expected to drive the next growth phase.
- significant public projects are slated for 2H24.
- rising inquiries for traditional DC equipment and GPU servers, with GPU deals reaching up tens of millions.
- the recent passage of the cybersecurity bill is expected to boost demand for cybersecurity products and services, particularly StarSentry.

ICT services
- cloud services and subscription base have seen consistent growth in recent quarters.
- service teal has reached more than 70 personnel after absorbing VMWARE engineers
- AWS regional hub launching these few months present significant opportunities in both commercial and public sectors cloud adoption.
- significant portion of the public sector expected to migrate to cloud.
- Enterprise not investing in on-prem GPU servers are likely to subscribe to AI enabled cloud engines to leverage AI capabilities.


Financial
- distribution cost increased – due to sea freight price hike and not due to removal of diesel subsidy.
- 1H24 rev -3% due to delay in public sector projects, GP +3% due to some rebate given, PBT -4% due to higher OPEX.
- net cash position: RM120.2m.
- DC will be the key driver next 3-5 years with multiple DC launches. Accelerating adoption of cloud with recurring revenue.
Thanks.