This article first appeared in The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

Even before news of the appointment of its unit as distributor of Amazon Web Services (AWS) services in May gave investors more reason to chase after its stock, the share price of Main Board-listed VSTECS Bhd (KL:VSTECS) had gained more than two-thirds from the start of the year.

At the time of writing, stock prices had easily tripled from the start of the year. At its recent high of RM4.47 on July 9, VSTECS’ market capitalisation was RM1.59 billion, according to Bloomberg data, which also shows UOB Kay Hian Research having a RM5 target price and “buy” recommendation on the stock. When it first floated on Bursa Malaysia in April 2010 as ECS ICT Bhd, its market capitalisation was only RM170.4 million.

VSTECS still qualifies for The Edge Malaysia Centurion Club Corporate Awards 2024, as its market capitalisation at the awards tabulation cut-off date of March 29 this year was RM905.65 million, below the threshold of RM1 billion that would have qualified it to be a member of The Edge Malaysia Billion Ringgit Club.

During the evaluation period of March 31, 2021, to March 31, 2024, for the Centurion Club awards, VSTECS’ share price rose from 36.8 sen to 67.4 sen. While the three-year adjusted total return was only 28.12%, according to the awards methodology, it is still the highest among peers in the technology sector — bagging VSTECS the Highest Returns to Shareholders Over Three Years award.

This is the second year running that VSTECS has won the Centurion Club award for Highest Returns to Shareholders Over Three Years, having taken home the same award in 2023. It had previously won the award for Highest Profit After Tax Growth Over Three Years in 2022 and 2023.

For FY2023, VSTECS paid a 6.6 sen dividend per share, or RM23.5 million in total. While the dividend was only 35% of its profits, it is the group’s highest-ever total payout so far.

VSTECS booked a net profit of RM67.4 million in the financial year ended Dec 31, 2023 (FY2023) — up 12.9% from RM59.7 million in FY2022.

Earnings were up year on year for at least five straight years, having risen from RM24.6 million in FY2018 to RM29.6 million in FY2019, RM36.8 million in FY2020, RM55 million in FY2021, RM59.7 million in FY2022 and RM67.4 million in FY2023. Its earnings gains between FY2020 and FY2023 alone translated into an adjusted three-year compound annual growth rate (CAGR) of 28%, according to Centurion Club awards methodology.For 1QFY2024, VSTECS’ net profit came in at RM14.32 million, down 3.5% y-o-y from RM14.85 million, on the back of a 7.3% y-o-y drop in revenue to RM616.36 million.

“Enterprise and public-sector data centre projects will continue to be our key focus. Our recent launch of AWS cloud services distributorship and potential new enterprise products will boost our profit and revenue,” the company said in notes appended in its 1QFY2024 earnings release.

VSTECS is an indirect 44.9%-owned associate of Hong Kong-listed VSTECS Holdings Ltd through the latter’s wholly-owned VSTECS Holdings (Singapore) Ltd, which describes itself as a leading information and communications technology (ICT) distributor in Asia-Pacific.

Starting out as a humble ICT peripherals distributor nearly four decades ago in 1985, VSTECS today distributes more than 40 brands through a network of over 3,600 resellers of ICT products as well as corporate and enterprise system integrators supporting the digitalisation push. About 20% of the group’s 410-strong workforce are technical personnel and solution architects, while half are in sales and marketing roles.

“By embracing emerging technologies, fostering strategic partnerships, and staying attuned to market dynamics, we are well equipped not only to meet but also exceed the evolving needs of our customers and partners. Our focus remains steadfast on delivering cutting-edge technology solutions to Malaysia, contributing significantly to the nation’s technological advancement and increasing its global competitiveness,” VSTECS non-independent non-executive chairman Lee Marn Fong @ Wu Marn Fong told shareholders in her statement appended in the group’s 2023 annual report.

“In the face of the ever-changing digital landscape, our long-term vision extends beyond immediate success. Our sustained growth trajectory is not just a reflection of our past achievements but also testament to our adaptability and proactive approach in anticipating and serving the nation’s ICT requirements. Our mission is not just about meeting current demands but also anticipating and enabling the nation’s digital transformation journey.”

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