The April letter outlined a detailed investment case for VendTek, so not a lot more is required

here. However, there have been two subsequent developments that demonstrate VendTek is

headed in the right direction in Brazil:

1) April 26 press release: VendTek announced that its Brazilian subsidiary added Oi

Telecom to its list of carrier partners for whom it sells products. Oi is one of the top

three wireless carriers in Brazil with over 39 million subscribers and 19.28% market

share as of January 2011. Oi has the largest percentage of prepaid customers among

Brazilian carriers (86%). It is also a leader in mobile payment services in the country.

The addition of Oi completed VendTek’s portfolio of prepaid wireless products in Brazil,

giving it the opportunity to compete with the three national prepaid distributors in

Brazil, each of whom were able to get to 600,000+ points of sale (POS) within 5-10

years. As I demonstrated in the April letter, it would only take 45,000 POS for

VendTek to generate substantial ($30million+ per year) cash flow from Brazil;

VendTek has guided that it will have at least 3,000 POS operational in Brazil by

October 31, 2011, not including the POS that it should have operational related to the

contract to provide mobile recharge services to a network of 3,000 POS operated by a

credit and debit processor.

2) On June 8, VendTek announced that its Brazilian sub signed an agreement with Banco

Santander to offer a national bill payment service throughout Brazil. Spain’s

Santander Group is among the largest financial institutions in the world by market

capitalization. In Brazil, Santander is ranked among the top five banks in terms of

assets, with over 24 million customers and over 10 million active accounts nationwide.

This agreement marks VendTek’s first foray into bill payment, and is indicative of the

continued expansion and success I believe VendTek will achieve in Brazil over the next

5 years (which is the time horizon for our investment).

A welcome—but non-fundamental—development occurred on July 13 when M Partners (a

boutique investment bank in Toronto) launched coverage on VendTek with a $1/share target.

This is the first new research report on VendTek since 2008, and is the only active coverage

of the stock, since most analysts who covered it dropped it after the stock was cease-traded

in early 2009. The analyst who launched coverage is Ron Shuttleworth. I have known him

for years, and have a great deal of respect for his analytical and business acumen—he came

from the technology industry before joining Bay Street in 2004.

The bottom-line is that VendTek appears to be finding success building the strong foundation for a transaction processing business that we expect to be valued in the $5-$10/share range

within 3-5 years.



Link to part 1.....http://www.stockhouse.com/Blogs/ViewDetailedPost.aspx?p=115745