Vocus Group Limited

Growth in Vocus Networks Aided Revenue Increase: Vocus Group Limited (ASX: VOC) had posted revenues amounting to $974.2 million in six months ended December 2018 reflecting a marginal rise of 1% on a YoY basis on the back of growth in Vocus Networks but got offset by fall in the revenues in Vocus Retail. The company witnessed a risein its capital expenditure in 1H FY 2019 and stood at $206.1 million as, in the same period of previous year, it was $110.3 million which was mainly because of Southern Cross IRU, deployment towards fibre network and capacity, implementation of improved digital sales and service capability across dodo™ and iPrimus™, customer specific fibre builds in Vocus Networks-Services and Customer Premise Equipment. From the past few quarters, the company has posted decent gross margins and it managed to maintain these margins within the range of 40%-44%. In 1H FY 2019, the company’s gross margin was 40.9%.
 

VOC’s Key Metrics (Source: Company Reports)

Reaffirmed FY 2019 Outlook: Vocus Group Limited had reiterated its expectations for FY 2019 by stating that it would be able to post underlying EBITDA in the range of $350 million-$370 million. However, the company’s capital expenditure is expected to be in the range of $160 million-$170 million (excluding ASC) in FY 2019.

Stock Recommendation: On the monthly chart of VOC, Exponential Moving Average or EMA has been applied and default values were used for the purposes. After careful observation, it was noticed that the company’s stock price has crossed the EMA and moved upwards after the crossover which hints that the stock price might witness a rise moving forward.  Also, the company’s second half is expected to be stronger than the first half because of the leadership team which is in place, full six months contribution from ASC, benefits of MVNO deal, further cost savings across the business and the improvements in service delivery cadence. Hence, we maintain our “Hold” recommendation on the stock at the current market price of A$3.630 per share (down 0.82% on March 5, 2019).  
 

oOh!media Limited

Amended Dealing in OML’s Securities Policy: oOh!media Limited (ASX: OML) had announced that they have amended the oOh!media Limited Dealing in Securities Policy. In the release, the company mentioned the events in which one must not deal in oOh! securities. There should not be any insider trading, there should not be “short term dealing” (buying and selling within the span of three months), there should be no margin lending arrangements and no trading during black-out periods. However, the company also provided waivers for the exceptional circumstances. Recently, the company also announced that after serving as Director of oO!media for the period of 12 years, Geoff Wild AM stated his intention to retire. In FY 2018, the company’s total revenues stood at $482.6 million which was witnessed on the back of strong contribution from Commute business.

Revenue Growth (Source: Company Reports)

The company leveraged the reach and diversity of its product portfolio with respect to Out Of Home media sector with the robust growth in revenues in Road and ongoing significant improvements in Fly as well as Locate on a YoY basis. The company’s organic revenue rose 10% and stood at $416.8 million.

Optimistic About Out Of Home Sector: The company is confident of continued growth in Out Of Home sector in 2019. In CY 2019, the company is expected to post underlying EBITDA between $152 million-$162 million. Also, the company stated that its capital expenditure would be between $55 million-$70 million. The company expects that its revenues and earnings would be weighted towards the second half of CY 2019. 

Stock Recommendation: On the daily chart of oOh!media Limited, Exponential Moving Average or EMA has been applied and default values were used for the purposes. It was noted that the company’s stock price had crossed the EMA and moved in a downward direction after crossover which reflects bearishness.

However, the company’s price-to-book ratio (or P/B ratio) is 1.2x which is in line with the industry median (Media and Publishing) of 1.2x.Also, there are expectations that the company’s revenues and earnings would be weighted towards the second half of CY19 and in line with historical trends. Meanwhile, the stock has fallen 18.65% in the past three months as at March 04, 2019 and is trading close to lower level. Hence, we maintain our “Speculative Buy” rating on the stock at the current market price of A$3.510 per share (up 0.573% on 5 March 2019).  

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