Tuesday, September 23, 2008

More on Privatisation of VADS

More on Privatisation of VADS

OSK wrote the following the following in their report.

  • Farewell To A Gem

    TM has proposed to privatise VADS at RM7.60 per share, matching our target price for the stock, which values the company at 12x FY09 EPS. We view the takeover as a beneficial exit option for minority shareholders as it addresses the stock’s illiquidity. We believe TM had taken cognisance of this in arriving at the offer price, with due consideration for VADS’ solid balance sheet. Hence, we are of the opinion that the minorities should acquiesce to the offer. Fully valued at RM7.60.

    Offer price at our target of RM7.60. TM has proposed to undertake the privatisation of VADS at RM7.60 per share implemented via selective capital repayment. The deal values VADS at 12x FY09 EPS, or a market capitalisation of RM1bn, matching our target price for the stock. The offer, which carries a 12% and 18.4% premium over the stock’s last traded and the 5-day volume weighted average price respectively, has adequately factored in the company’s enviable cash flow/balance sheet and dividend prospects.

    Solid fundamentals. VADS has not disappointed given its successive y-o-y growth in revenue and earnings, charting CAGRs of 28.6% and 39.3% respectively since listing in 2002. Its earnings are highly visible, thanks to strong recurring revenue from the managed network services (MNS) segment. The focus on the business process outsourcing (BPO) space unlocks a strong revenue stream and is expected to spearhead earnings growth going forward. We project EPS growth at a healthy 25% on average p.a. going into FY10.

    One more bites the dust. We were one of the first to commence coverage on VADS in 2005 and had consistently picked the stock as our top pick in the small cap ICT sector for 3 consecutive years. Its privatisation will undoubtedly remove a jewel whose track record is difficult to emulate. The scarcity value attached to the stock is reflected in the takeover price, which we deem fair. We advise minorities to accept the offer as it is a good exit strategy to unlock the value of a stock that has been plagued by liquidity constraints and is trading at an unwarranted discount to its global BPO peers.

This is where it is sooooooooooooooo wrong.

Acquiesce to the offer?

According to my pal Wikiseng, to acquiesce is to knowingly standing by without raising any objection to infringement of his rights...

So if I am not flawed again, is OSK telling VADS minority shareholders just to accept the offer, in regardless?

Forget about the fact that company has solid fundamentals?

Forget about the fact the stock had managed to register stellar CAGR growth of 28.6% and 39.3% since listing?

Forget about the fact the offer price is priced only at 12x FY09 EPS?

Forget about asking if the offer price is justifiable or not?

Just acquiesce to the offer.

Sad isn't it?

Don't you think you are not fully compensated?

So how?

Better consider what happens here before you invest in any listed subsidiary.

So long farewell, it's time to say goodbye....

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