KUALA LUMPUR (Sept 1): VSTECS Bhd (KL:VSTECS) is cashing out of its seven-year investment in software company ISATEC Sdn Bhd for RM48.75 million as it plans to redirect capital towards larger projects in areas including artificial intelligence (AI) and data-centre infrastructure.
The information and communications technology (ICT) distributor is selling its entire 40% stake in ISATEC to Singapore-based Skyform Pte Ltd, according to its filing with Bursa Malaysia on Tuesday.
Four management shareholders of ISATEC will also sell part of their stakes to Skyform, amounting cumulatively to 35% for RM42.66 million. Overall, Skyform is acquiring 75% of ISATEC for RM91.41 million.
We believe the investment has achieved its original strategic objectives, and it is now time to redeploy the capital into our wholly-owned core businesses, which continue to experience robust growth,” VSTECS chief executive officer JH Soong said in a statement.
ISATEC mainly provides software products and contract programming services to corporate, financial-services and public-sector customers.
VSTECS acquired its first 30% stake in ISATEC in 2019, before raising its share to 40% the same year for a total investment of RM18.80 million. That puts the RM48.75 million disposal price about 159% higher than its investment.
The group expects to recognise a one-off gain of about RM21.96 million from the disposal. Taken together with dividends received from ISATEC over the years, VSTECS said its total cash returns would reach RM64.97 million, equivalent to 3.46 times its original investment cost.
VSTECS bought into the company to strengthen its ICT services capabilities. Since then, VSTECS said it has substantially expanded its in-house ICT services operations, with segment revenue growing more than tenfold since 2018.
VSTECS intends to use part of the proceeds as working capital for its three core businesses — ICT distribution, enterprise systems and ICT services — including the procurement of IT hardware, software, solutions, devices, peripherals and services. The group said these businesses are benefiting from demand generated by public- and private-sector digitalisation, data-centre development and AI-ready infrastructure.
“Enterprise Systems business, in particular, is undertaking increasingly larger projects, including AI-related data centre infrastructure, while longer procurement cycles and higher equipment costs have increased working capital requirements,” Soong said.
“The additional financial flexibility coming from the disposal proceeds will strengthen our ability to support larger projects while allowing us to respond quickly to new opportunities across AI infrastructure, cloud computing and enterprise digital transformation.”
Upon completion of the disposal, ISATEC will cease to be an associate of VSTECS and the group will no longer recognise its share of ISATEC’s earnings. The proposed disposal remains subject to conditions under the share purchase agreement and is expected to be completed by the first quarter of 2027.
Shares of VSTECS closed three sen or 1.8% lower at RM1.67 on Tuesday, valuing the group about RM1.8 billion. The counter has gained more than 22% year to date.
Source from https://theedgemalaysia.com/
