VADS suspended, may be taken private

Trading in VADS Bhd was suspended from 9am to 5pm on Monday at the request of its parent Telekom Malaysia Bhd and analysts said there was possibility of VADS being taken private.

“The request for suspension is in view that the board of directors of TM will be deliberating on a proposal involving VADS,” TM said in a statement to Bursa Malaysia.

TM holds 83.42 million shares or 63.24% of VADS. VADS was last traded at RM6.80.

CIMB Equities Research said VADS was going into the last quarter of this year on a very solid footing.

“Its staple divisions have surmounted the local political travails and relatively weak economic environment. Both divisions, namely managed network services (MNS) and contact care service (CCS) are projected to chalk up double-digit growth in revenue, a commendable performance in difficult times. The recurring order book stands at a strong RM470mil to RM480mil,” it said.

CIMB Research said VADS remained one of its favoured picks in the tech sector for its above-average three-year earnings per share (EPS) compounded annual growth rate (CAGR) of 19.3%, strong returns on equity (ROEs) in the region of 35%.

Other factors were VADS’ defensive qualities with free cash flow to equity (FCFE) of 5.8% and attractive dividend yields.

“These are compelling reasons for its parent, Telekom Malaysia, to consider privatising VADS and we are not surprised by the news as this speculation is not new.

“If such a move were to occur, we would be positive as it would fully unlock the value of the shares to minority shareholders given the low liquidity of the shares,” it said.