KUALA LUMPUR (June 24): Shares in Vstecs Bhd broke above its key resistance level and rose as much as 12.88% with higher volume in early trade today.

At 11.12 am, the stock was up by 14 sen or 10.61% to RM1.46, surpassing research firms' technical target price range of RM1.29 to RM1.39. It was listed as the seventh top gainer across Bursa.

Meanwhile, volume came in at 3.54 million shares, more than five times higher than its 200-day average trading volume of 672,975 shares.

Notably, on recent stock technical analysis notes, both AmInvest Research and Mplus Research called for "buy on breakout" should Vstecs break above the RM1.24 level, on the premise of positive technical outlook.

"With the RSI indicator above the 50% threshold level, coupled with higher lows pattern, we see that the bullish momentum is intact," AmInvest said.

AmInvest's short-term target price (TP) was set at RM1.29 to RM1.35, while Mplus called for TP range of RM1.30 to RM1.39. Downside support prices were set at RM1.12 and RM1.19, respectively.

Fundamentally, for the first quarter ended Mar 31, 2020 (1QFY20), Vstecs recorded a higher net profit of 59.9% at RM6.78 million from RM4.24 million a year ago, despite recording a slight dip in revenue of 1.6% to RM372.67 million from RM378.83 million.

In a bourse filing, Vstecs said it recorded a higher gross profit (GP) margin of 6% from a better product mix compared with the GP margin of 4.8% last year, and attributed the better performance of its enterprise and services segment — the direct beneficiary from the work from home trend, as the main reason.

Meanwhile, its ICT distribution segment posted lower revenue and profit due to lacklustre sales from notebooks and mobility products.

Commenting on its prospects, Vstecs said the new business norm of working from home will spur demand for bandwidth and devices from the commercial and enterprise markets, and it expects this trend to continue in growing the revenue of its enterprise and services segments.

"Businesses will be digitally transforming and upgrading their ICT infrastructure with enterprise products such as videoconferencing facilities, cloud computing and cybersecurity software," it said.

As for its ICT distribution that is largely hinged on the consumer market, the group said the current tough economic climate will likely hit demand for its consumer segment.

Nevertheless, it said it has developed e-commerce strategies to broaden its reach for both its business-to-business and business-to-consumer market segments due to the growing popularity of online purchases.