Vocus Group Limited
 

Vocus Group Limited (ASX: VOC), formerly known as Vocus Communications Limited, seems to be taking a rebound in its stock momentum as seen in the last couple of months (up 36% in last three months, as at September 26, 2018). The group that provides telecommunications and other services across Australia and New Zealand, last month updated its annual result for FY18 wherein the group reported net profit after tax of $61.05 million for the year ended 30 June 2018 while revenue from ordinary activities were $1,902.18 million, indicating a rise of 4.19% over FY17. There was a significant improvement in diluted EPS as the same was reported to be 9.79 cents compared to (237.65) cents of last year. While the group did not declare any dividend, the result was better than what the market was expecting given the telecom sector headwinds.

While the stock has been under discussion with regards to the ownership structure which can have an impact on shareholder returns in short and long-term, the fundamentals are turning better.

VOC closed up 2.48 percent on September 27, 2018, and traded about 1.8 times normal volume. With the upward trend, the stock again fell in an overbought zone. Due to the stock's uptrend momentum that has been witnessed lately, it may remain in such zone for a while. The stock’s strength indicators have been reflecting a positive sign for quite some time.

Group’s Enterprise, Government & Wholesale business reported for underlying EBITDA growth of 15% with revenue growth of 11% at the back of a disciplined and structured approach to sales, expansion of sales presence on the East Coast, and better product mix. Improvements to internal processes and customer self-service toolboxes helped in gaining better customer attention. The group has valued key contracts such as the one with the Australian Government to construct a sub-marine cable between Solomon Islands, Papua New Guinea and Australia (the ‘Coral Sea Cable’), and a domestic cable network within Solomon Islands. Collaboration with Northern Territory Government to construct a new fibre optic cable link between Darwin and the Tiwi Islands has been an addition to the kitty. Its 40TB Australia Singapore Cable (ASC) is also now ready for service.

The group also established financial headroom with closure of a new and increased debt facility of A$1,270 million and NZ$150 million in 2018; and capital management is again a priority in FY19.
We give a “Hold” on the stock at the current price of $ 3.300 while the group has a low market share relative to national and international fibre and network assets and is aiming to enhance its reach through various strategic moves.

 

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