We initiate with a "Buy" rating and a TP of HK$6.16, which is based on 2024F P/E of 7.8x. We base our target price for the Company on P/E relative valuation. The Company is set to resume constant and consistent growth based on two growth factors: 1) An increases in digitalization in SEA driven by improvements in general economic conditions and 2) Partnerships with leading companies in the fast growing tech industry. We estimate net profit for the years 2024, 2025, and 2026 to be HK$1,012 mn, HK$1,173 mn, and HK$1,340 mn, respectively. We currently value the Company at a market capitalization of approximately HK$86.5 billion based on 2024F of 7.8x.
　　The Company’s revenue is strongly correlated with general economic growth. The combined GDP of Indonesia, Malaysia, Philippines, Singapore and Thailand increased at a CAGR of 5.7% during the period from 2008 to 2023, while during the same period company revenue in the region grew at a CAGR of 12.0%, 2.1x the general growth rate. The IMF currently projects that APAC as a whole will grow at a rate of 4.5% for 2024, therefore the Company’s at over double the growth rate of the projection should grow at a rate around 9.5%.
　　The Company’s is deeply involved in emerging technology supply chains, and is long term partners with Huawei, SpaceX, Alibaba, Nvidia etc. VSTECS is fully involved in every step of the AI supply chain, including end user applications, AI developmental software and other tools, and AI infrastructure. It has partnered with global technology giants for decades, and has maintained deep ties in distribution. Recently, the Company announced its partnership with SpaceX to distribute Starlink products across Malaysia, this partnership not only increases immediate revenue but also serves as a gateway for future collaboration with the low-orbit economy giant.
　　Catalysts: Earnings recovery faster than market predictions in 2024Q4 earnings call.
　　Risk: Uncertainty surrounding geopolitical tensions.