Vocus Communications Limited

VOC Details
· Management resignations and uncertainty hurting the stock sentiment: Vocus Communications Limited (ASX: VOC) stock plunged over 24.5% on November 29, 2016 after their AGM update.

· Disappointing guidance: Vocus CFO, Rick Correll is leaving the firm after serving for 7 years. The group’s constant management changes are also an ongoing concern to investors. Moreover, despite the contribution of $41 million from Nextgen, the group estimates an underlying Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) in the range of $430 million to $450 million. Vocus forecasts to derive over $57 million in synergies from acquisitions. Management issued an underlying Net Profit after Tax (NPAT) guidance in the range of $205 million and $215 million. Moreover, NBN migration is taking more time than estimated while the group expects to incur further $7.9 million costs in FY17 for customer migration. Rising capital expenditure due to the group’s acquisitions remains a concern.

· Recommendation: Vocus stock has been under pressure this year and lost over 37.8% (as of November 28, 2016) in the last six months and still trading at an unreasonable P/E. We reiterate our “Expensive” recommendation on the stock at the current price of $ 4.35

Rising capital expenditure (Source: Company Reports) 

Metals X Limited

MLX Details
· Stock fall due to Demerger:Metals X Limited (ASX: MLX) fell 55.8% on November 29, 2016 as the shares traded on an “ex” basis at the back of demerger of the group as Metals X and Westgold Resources Ltd, while Blackrock Group increased its interests as substantial holder to 13.97% from 12.97%. As per the group’s new share structure on the demerger, MLX shareholders would get one share of Westgold Resources Limited for two of their Metals X shares while MLX shares are retained as such. The In Specie distribution of Westgold shares or the dispatch date is December 01, 2016.

· Recommendation: The fall offers an investment opportunity as the group is diversified with a Resource and Reserve base in Tin, Copper, Nickel, and Cobalt. MLX is the only listed Tin producer in the western world (with over 3,500tpa Sn). MLX is also a major Copper Producer with > 30,000tpa Cu. MLX also has core undeveloped Ni-Co-Fe deposits in the world and has development ready growth projects in Tin & Copper at hand. We give a “Buy” recommendation on the stock at the current price of $ 0.70
 

Simplifying corporate structure (Source: Company Reports)

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