PETALING JAYA: VSTECS Bhd expects the higher interest rate environment in the country to negatively impact consumer spending and sentiment.
The information and communications technology (ICT) company said the demand for consumer products would likely slow for the next few quarters but the enterprise sector would remain resilient with opportunities from cloud services and data centres. “We continue to work on large project opportunities from the government-linked companies and public sector.
“While we are cautious on the consumer sector, the outlook for the enterprise sector continues to remain strong for the second quarter (2Q23) and the balance of financial year 2023 (FY23).
VSTECS posted a 3% year-on-year (y-o-y) rise in revenue of RM664.7mil for the first quarter ended March 31, 2023 (1Q23) with its Enterprise Systems and ICT Services segments posting a 30.6% and 39.7% rise in revenue respectively.
“This growth underscores the ongoing upward trend in enterprise spending on infrastructure and digital transformation, as businesses increasingly recognise the critical role of technology in maintaining competitiveness in today’s business landscape,” the company said in a statement yesterday.
VSTECS ICT distribution segment’s revenue fell 25.2% y-o-y in 1Q23, reflecting consumers’ heightened caution towards discretionary spending.
The company remained focused on adapting to market dynamics and meeting evolving consumer demands.
Earnings in 1Q23 rose 25% y-o-y to RM14.8mil or earning per share of 4.2 sen on higher profit margin contribution from the enterprise systems and ICT services segments.
According to VSTECS CEO Soong Jan Hsung, the industry is seeing a significant increase in enterprise spending on technology and the trend is likely to extend beyond 2023.
“As technology continues to evolve, we have a vast runway ahead of us, with plentiful opportunities to support the digital transformation journey of enterprises in both the public and private sectors,” he said in a statement.
He added organisations are actively recognising the importance of upgrading legacy systems and embracing transformative technologies like cloud computing and artificial intelligence to remain competitive.
The emergence of Malaysia as a regional data centre hub has enabled VSTECS to secure several distributorships for data centre power solutions.
Its ICT Services segment will trace the growth trajectory of the enterprise segment while its investments into cloud services over the past two years will make a positive contribution in 2023, with further growth to be expected.
“We are also growing the maintenance and managed services under this segment to increase recurring revenue and provide further earnings visibility for our group.
“We are finalising several new data centre and cloud related projects, and hope to announce some positive news soon,” Soong said.
While the ICT distribution segment is anticipated to have a subdued performance due to softer consumer spending on end-point devices, it remains a crucial pillar of VSTECS’ business in 2023.
Due to the cyclical nature of product upgrades, the group expects consumer spending on end-point devices to regain momentum next year.