VICOM (Lim&Tan)

S$3.76-VCOM.SI

􀁺 Vicom is likely the only stock scaling new heights in an overall lousy market , rising 37 cents or 11% % in just 5 trading days from July 7th.

􀁺 We would not rule out Comfort Delgro finally deciding to privatizing Vicom:

a. Comfort Delgro already owns 68.1% (at say $3.76, such an exercise will cost just over $100 mln);

b. Trading liquidity is understandably poor, averaging 11,000 shares a day in the year-to-date;

c. Vicom has a “clean” balance sheet, with $53.1 mln cash and no borrowings at end Mar ’11;

d. Its shareholders are largely retail, given the top 10, including Comfort Delgro and only one institutional shareholder - Fidelity with 3.67%, collectively own 74%;

e. A Scheme of Arrangement would likely be the most effective way to carry out this exercise;

f. Exit Offer may not have to be set a too-big a premium to current market (already 3.3 times Mar NAV of $1.142 a share), having already surged 29% since end ’10 (STI was down 3% during the same period), and the unlikelihood of a competing bid.

􀁺 We do no have a call on the stock primarily because of poor liquidity.