SHARINGAN: VSTECS – Could it be the next GameStop (up more than 1,000% in 1 month!!!)?

GameStop is a consumer and gaming electronics retailer from US. With strong demand for PS5 and Nintendo Switch, they should be laughing to the bank now. Share price shot up 93% yesterday and more than 1,000% in the past 1 month!! Back to Malaysia, we have VSTECS (5162: RM2.26) which is an electronics distributor, and it seems they’re enjoying from the latest developments as well.

As students have no choice but to study from home during MCO, many are rushing to buy notebooks/PCs, which may boost VSTECS’ sales. Thanks to Ministry of Education’s latest aid initiative, 150k students will receive free computers across 500 schools from February onwards. On top of that, Ministry of Higher Education also introduced Bantuan Laptop and Bantuan Smartphone for the B40 group

Even without the initiatives, I’ve already been hearing booming electronics sales in the past few months, possibly due to long period of working-from-home. VSTECS also expanded into gaming segment (including Microsoft’s Xbox and Sony’s PlayStation) since 2014, which puts them in a good position given that now gaming console sales are overwhelming with the latest launch of PS5.

All tech companies in Malaysia are skyrocketing with PE of 30-50x or even higher, while VSTECS is only trading at 11x+. 4Q20 results will likely be out next month. Last year 4Q19 profit was up 30% QoQ likely because year-end is normally a good season for electronics. If we assume 4Q20 also grows by 30% QoQ, profit can reach RM13m in one quarter. If momentum can continue due to recent initiatives, RM13m x 4 quarters = RM52m. If investors can pay 15x PE for the company, the calculation will give me RM4.37/share.

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DISCLAIMER: The note above is purely facts sharing for educational and discussion purposes. I do not recommend BUY/SELL actions. I am also invested in the stock.