VADS – 3QFY08 : Mixed set of results

November 4, 2008 at 4:00 am Leave a comment

3Q08 results still decent

VADS reported 9M08 revenue and net profit of RM391.4m (+10.9% y-o-y) and RM59.9m (+45.0% y-o-y) respectively. On an annualized basis, 9M08 revenue represented only 59.8% of our annualized estimates, but net profit was on track at 74.0%. Overall, there were improvements in margins sequentially as gross margins and net profit margins increased to 15.7% and 13.3% respectively in 3Q08.

Cumulative revenue +10.9% y-o-y, net profit +31.9%

Cumulative revenue and net profits increased y-o-y, due to new accounts secured for the Managed Network Services (MNS) segment. MNS and Business Process Outsourcing (BPO; formerly Contact Centre Services)
contributed 52% and 42% of 9M08 revenue respectively. MNS registered 9M08 revenue increase of 11.9% y-o-y to RM211.8m, while BPO was up 19.0% y-o-y to RM169.4m. 9M08 PBT growth for MNS was impressive at
66.2% y-o-y, but BPO disappointed with stagnant growth at RM20.4m.

EGM to be convened on Nov 24

The EGM to pass the proposals to privatise VADS will be convened on Nov 24 at the Kuala Lumpur Golf & Country Club. If executed smoothly, the privatisation will be completed in 1H09.

Accept the offer, offer price is fair

We make no changes to our forecasts, and reiterate that shareholders should accept the privatisation offer of RM7.60 cash per share, given that it is 2.7% higher than our target price of RM7.40. Our target price is based
on 13x FY09 FD EPS estimate of 56.9 sen.

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