Exclusive: VST Reaching For Clouds Amid Growth Spurt

VST HOLDINGS LTD (00856), a leading distributor of IT products and services in China and several key Southeast Asian markets, is relying on a broadening array of goods to boost its top line, a technology expert told Asia Fund Space.

The Hong Kong listco is coming off a solid performance, with an FY2014 net profit rise of 20.82% to 607 million hkd, with revenue up 4.11% at 41.893 billion hkd.

Asia Fund Space:  The much higher annual bottom line growth rate versus revenue expansion suggests that VST is successfully migrating to higher-margin products and services.

Do you think they can maintain this enviable dynamic, or might they even do better going forward on cloud-based business and even higher margin sales?

Mr. George Wang, Analyst, SBI China Capital: I think VST can keep their profit from their basic business in a stable and reasonable range, for their distribution business in electronic production in the areas of North Asia (mainly in the mainland China) and Southeastern Asia is stable.

At least, the well constructed distribution net in these areas has no problems in recent years.

Although they try to seek out some kinds of businesses with higher net value, it is mainly about constructing the distribution net for smartphones.

But I don't think this kind of business can last for long time.

As to cloud services, it is not an easy thing to get high profit from this, whereas in the long run, it is a good business area for development.

Asia Fund Space:  VST's share price is currently hovering near 52-week highs, quite impressive amidst a so called sluggish economic recovery.

On the business side, are you confident VST can maintain its strong presence in two different geographic markets - the PRC and Southeast Asia?

Mr. George Wang: The stock price is too high though it has dropped recently.

I think if it can successfully break up the point of 3.20 hkd, then there will be an uptrend.

Otherwise, there will be a downtrend.

Because I thought it has been a long time in the tunnel, I think it would be a sharply up or down movement at that time.

VST Holdings Ltd was incorporated in 1991 and became listed on the main board of the Stock Exchange of Hong Kong Limited in 2002 (HKSE: 00856.HK). In 2014, turnover of the Group amounted to HK$ 41.9 billion. It is a leading IT products and services supplier in the Asia Pacific, which integrates global information industry resources to create value-added services to over 100 top global IT brands. The Group's business system consists of IT supply chain financial services, planning and implementation of enterprise-class systems, IT value-added services and distribution. Its products include cloud computing, mobile Internet, digital peripherals, network infrastructure, storage solutions, software and services, information security, IT products and distribution of related accessories, as well as successfully expanded game business in 2014 . The Group has over 33,000 channel partners serving a wide regional customer base and 81 offices in nine countries, namely China, Thailand, Malaysia, Singapore, Indonesia, Cambodia, Myanmar, Laos and the Philippines. The Distribution segment distributes various IT products, including desktop PCs, notebooks, tablets, handhelds, printers, CPUs, hard disks, and memory devices for the commercial and consumer markets. The Enterprise systems segment designs, installs, and implements IT infrastructure for companies. This segment provides enterprise system tools, such as middleware, operating systems, Unix/NT servers, databases, and storage and security products for IT infrastructure. The IT Services segment offers IT infrastructure design and implementation, training, maintenance, and support services. The company is also engaged in the retail of IT products, IT equipment, and accessories. VST Holdings Limited serves individuals, small and medium enterprises, large corporations, and government entities through a distribution network of resellers comprising retailers, system integrators, and corporate dealers. It operates in China, Thailand, Malaysia, Singapore, Indonesia, and the Philippines. VST Holdings Ltd is headquartered in Central, Hong Kong. Its diversified product portfolio includes HP, Apple, Seagate, AMD, Intel, Western Digital, Lenovo, Dell, IBM, Acer, Microsoft, Oracle, Cisco and Asus, along with many more.

(Note: This story is contributed by Andrew Vanburen. Mr. Vanburen has served as a
government official focused on international trade at the American Institute of Taiwan in
Taipei, and worked in financial journalism for nearly a decade in both Beijing and
Shenzhen. He holds a Master's Degree from New York University. He is currently Director at
Hong Kong-based Asia Fund Space. For more information, please visit:
www.asiafundspace.com)