PETALING JAYA: Most local research analysts say the recent RM254.6mil contact centre services (CCS) contract awarded to VADS Bhd by Telekom Malaysia Bhd (TM) was in line with their expectations, in terms of contract size.
OSK Research said the TM contract was the third and largest CCS job secured by VADS.
The contract was five times the size of the TM streamyx customer interaction contract secured in May 2005 and nearly double that of the Celcom call centre services contract, the research house said.
With the contract in the bag, VADS has become the largest CCS operator in Malaysia.
OSK Research has raised VADS' financial year ending Dec 31, 2007 (FY07) earnings target by 14% to factor in the latest contract.
The research house said that billing momentum had accelerated sharply from third quarter 2006 owing to stronger recognition of projects secured at the start of the year.
An analyst with AmResearch said VADS' recent contract had been anticipated and would have a positive impact on its earnings from FY07.
She said assuming billings of RM50mil in FY07, VADS’ CCS revenue would be boosted by 36% to about RM186mil, giving a 21% enhancement in the company's bottom line and lifting its projected net profit to RM37.6mil from RM30.9mil in FY07.
The analyst has maintained a “buy” recommendation on the stock with an upside of 16.4%, potential capital appreciation of 12.7%, and dividend yield of 3.7%.
An analyst with Affin Securities said VADS' fair value of RM7.90 had been tweaked down to RM7.60 as the previous valuation was based on the assumed contract value of RM60mil a year over five years for the TM contract, instead of RM50mil per year.
The analyst maintained a “buy' call on the stock.
VADS closed 25 sen higher at RM6.80 yesterday.