Partner Accumulation of Vendtek System (VSI.V) Stock May Indicate Positive Catalysts

Yesterday, VSI announced that Privinvest Holding SAL of Beirut Lebanon has acquired 915,000 additional shares at between $0.75 anf $0.78, bringing the total effective shares outstanding held by Privinvest to 7,367,500 or 16.3% of the total equity.

The accumulation of shares by Privinvest is notable because it is the investment arm of Vendtek Systems' distribution partner for the Middle East. Earlier this year, VSI and Privinvest entered a 5 year regional deal which includes approximately 17 countries in MENA (Middle East North Africa).

I find it highly encouraging that VSI's operating partner has been accumulating stock throughout the year. The price range has been between $0.70 and $0.90. Currently, VSI generates about $1.0 million in net contribution per annum from the deployment of its software in the UAE, the first market in the region with a pre-paid subscriber based of approximately 6 million.

I estimate that the total number of mobile subscribers in the MENA region is approaching 130 million. Egypt, Saudi Arabia, Morrocco, and Algeria combined represent close to 100 million prepaid subscribers.

Privinvest has invested approximately $5.0 million in its partner VSI because it is likely confident that there are going to be some significant country rollouts soon. Saudi Arabia has been hinted at for for some time, although I think that there may be more than Saudi Arabia to come. If 6 million subscribers can generate $1.0 million in net contribution for VSI, a subscriber base of 30 million offers 5 times the potential income potential, or $0.11 per share in contribution. But that includes only Saudi Arabia. What if there is more?

In addition to its potential in the Middle East, VSI is finally ramping up its US rollout and is expected to be deployed on as many as 200 - 300 terminals per month by January. I firmly believe that the market conditions in the United States are aligned to VSI's success. As early as last December it was clear to me that Vendtek should benefit from an economic recession in the United States. Survey after survey in the United States indicate that consumers consider their mobile subscription to be essential. Surpisingly, most surveyed are willing to give up landline telephones, and cable TV ahead of their mobile phones. However, an increasing percentage of the population does not qualify for post-billing services. As more Americans prepay for their service, I expect that over-the-counter topups will increase in frequency. As the economy declines, and petty crime increases, more and more retailers are likely to opt for more secure electronic topup systems. These two trends should benefit VSI.If the rollouts in the US continue to pick up steam, Vendtek Systems is in an advantageous position.

Privinvest's accumulation of VSI stock hints at the potential for major rollouts in the Middle East, while the US recession pushes more American mobile subscribers towards VSI's solutions. As the world economy contracts, and many Companies struggle for earnings, the future couldn't be brighter for Vendtek Systems. Certainly Privinvest thinks so; and it likely has some pretty good insight on future demand.

I do not own shares of VSI, nor do I recieve compensation from the Company, its Directors, or its employees.

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