DBCVickers Report - 06 Dec 2007

Frontline Offer price is attractive and above industry average

Story: British Telecom Global Services (BT) has proposed to acquire Frontline at a cash consideration of 24.5 cents per share. With this acquisition, BT would get (a) A footprint in nine key Asian countries with reputed customer base (2) Access to over 5,000 employees in Asia, with low wage advantage.

Point: The offer price is attractive at 6.5% premium to our previous target price of 23 cents, based on 12x FY09 earnings. We like to highlight two key points: (1) The offer price translates into FY08 PE of 16.3x, which is above the average PE of 14.5x for the Singapore IT sector; (2) It offers 29% premium to the average closing price of S$0.19 in the last week, which is higher than the 10% premium offered by VST Holdings to ECS Holdings recently.

Relevance: We recommend investors to accept the offer. We want to highlight that Silverlake Axis could be an attractive acquisition target due to its strong regional footprint across Asia & Middle East and a high margin product business of core banking solutions.