VST: Revenue Up 14% But Profit Hit By HP Slide

From left: VST Hldgs Executive Director Chan Hoi Chau, CEO Grace Chow, Chairman Tay Eng Hoe, CFO William Ong and Cara Pang of Aries Consulting (standing).
Photo: Randy Chung, Aries Consulting

VST HOLDINGS Ltd (HK: 856), the No.1 IT products distributor in the Asia Pacific, grew its top line nearly 14% last year to 37.1 billion hkd.

However, the Hong Kong-listed firm’s net profit slipped almost 5% due to intense competition, the ongoing global slowdown and a sudden decline in HP’s business in China, VST’s Chairman told investors in Hong Kong.

VST showed strong growth in its distribution segment, driven by higher sales of hard disk products and mobility devices.

In the enterprise systems segment, the company saw more robust sales to Southeast Asia, especially in the fourth quarter of FY2012.

Gross profit for the year amounted to 1.407 billion hkd (2011: 1.513 billion).

Basic earnings per share stood at 35.82 cents (2011: 36.80 cents).

VST is offering a dividend of 8 HK cents per share for the year ended 31 December 2012, with a bonus issue of two shares for every 10 ordinary shares.

“Leveraging on our diversified products and strong distribution network, we further improved our product range and expanded our distribution network.

“Our businesses have also extended from distribution of IT products for the commercial and consumer markets to provision of enterprise system tools for IT infrastructure, training, maintenance and support services,” said VST Chairman Tay Eng Hoe.

He added that VST’s diversified product lines now include HP, Apple, Seagate, AMD, Intel, Western Digital, Lenovo, Dell, IBM, Acer, Microsoft, Oracle, Cisco, Asus and many more.

“Looking ahead, VST will focus more on emerging markets such as China, focusing on mobility devices. For Indonesia, our focus will be on Enterprise Systems, storage and software products.

“We will also focus on key vendors and escalate such relationships with a view to expanding the product portfolio.”
 
In terms of product portfolio, Mr. Tay added that VST will continue to tap the growing market for mobility devices.

“At the same time we will also emphasize Enterprise Systems to grow our margins. We will continue to strengthen our working capital management, improve cost management and boost operational efficiencies.”

In view of the uncertain global economic outlook, he said VST will continue to focus on the fundamentals of cost management, improving the working capital cycle, strengthening its balance sheet and boosting operating cash flow.

“With our experienced management team, VST will continue to look for opportunities to partner with more well known IT suppliers and continue to expand our product mix and sales channels so as to achieve better results.”

VST improved its net debt to equity ratio to 0.41 at end-2012 from 0.68 six months earlier.

“We will strive to maintain it at this level, as well as maintaining our dividend payout ratio at around the 21% level going forward,” said VST CFO William Ong.

 Investors asking questions at VST's results briefing in Hong Kong last Friday.
Photo: Randy Chung, Aries Consulting

Commenting on VST’s 2012 results, Mr. Ong said the firm has targeted revenue growth of 10-15% over the past few years.

"We hit on the high end of this target last year,” he said.
 
Despite the falling market shares of US-based PC makers HP and Dell in China – both major clients of VST – Mr. Ong said VST is well-positioned to deal with the changing market scenario.

“HP and Dell continue to slide, but that has been largely counterbalanced by a growth in our business with Apple and Lenovo,” he said.

He said the lower gross margins last year were partly the result of a shift to more distribution-side sales.

VST recently 2.1 hkdGross profit margins for VST’s distribution segment last year were between 2.5-5.0%, while those for enterprise sales were 6-8%.

“We also put more effort into clearing out inventory to maintain a healthy balance sheet.”

He called VST’s 33 working capital days for 2012 “quite healthy.”

“But there is always room for working capital improvements.”

Looking ahead, he said cloud computing business and “software as a service” operations would likely increase.

“We have to conduct more research into cloud computing to determine whether it would be revenue positive going forward.”

VST Holdings Ltd is the leading Information and Communications Technology (ICT) products and services provider in the Asia Pacific, specializing in the distribution of global premier IT products and related components including desktops, notebooks, tablets, hard disks, CPUs, storage devices and other digital media products. The Group has solid and long-term partnerships with international renowned IT giants such as HP, Apple, Seagate, AMD, Intel, Western Digital, Lenovo, Dell, IBM, Acer, Microsoft, Oracle, Cisco, Asus, and many more. VST has over 27,000 active channel partners serving a wide regional customer base with 76 offices in six countries: namely China, Thailand, Malaysia, Singapore, Indonesia, and the Philippines.

See also:

VST CHAIRMAN: 'IT Gadgets Already Life Necessity'