Vocus Group Limited

Apex Level Organizational Changes: Vocus (ASX: VOC) stock price was up by 4.327 per cent on May 21, 2018 following the update on apex management appointments. According to the release, the Group has appointed Kevin Russell to the Board as a Group Managing Director & CEO, effective from May 28, 2018.  Moreover, Mark Callander, CEO of Vocus New Zealand, will also join the Vocus Board on 28 May as an Executive Director. Mr. Kevin Russel is an internationally experienced CEO with more than 20 years in the telecommunications industry in Australia, the UK, USA and Israel. During this time, he has demonstrated his ability to lead change and drive substantial improvement in business performance, notably leading Hutchison Three UK Ltd through a £1 Bn turnaround, from a £900 Mn loss in 2006 to £100 Mn profit in 2010. His recent roles at Telstra (as a Group Executive) and Singtel Optus (as a Country Chief Officer & CEO) give him a deep understanding of the Australian landscape, particularly the NBN, and how it is shaping the local telecommunications industry. Based on rich exposure in international market, the Group expects that Kevin will be leading the group through its next stage; and build a high-performance team that is focused on developing and executing a strategy to deliver the potential value within the Company.


Net Debt and Syndicate Bank Facility (Source: Company Reports)

Recently, the company announced restructuring plans to simplify its business structure. In addition to this, the group is seeking to sell its NZ business at an appropriate price to improve its balance sheet and avoid debt covenants. Further, the group announced that its lending syndicate has consented to amend its covenants under its existing debt facilities by extending the ‘surge limit’ relating to its Net Leverage Ratio cap of 3.5x, and this will reduce to 3x after 31 December 2018. The management expects that the increased financial capacity and covenants that will be sought through the refinancing will provide sufficient financial flexibility for the Company to complete its strategic and transformation initiatives over the next few years. On the other hand, the Group downgraded its earnings guidance for the full year with Underlying EBITDA now expected to be in the range of $365-380 million (from previous guidance of $370 - $390 million) on revenue in the range of $1.9-2 billion (unchanged). This revision mainly relates to the Australian Consumer division facing headwinds in 2HFY18 due to over hedging of its energy portfolio and a change in the ‘go to’ market strategy. The stock prices have declined in the last six months by 21.07 per cent but went up by 3.06 per cent in past one month as at May 18, 2018. We continue to maintain our “Hold” recommendation on the stock at the current market price of $ 2.460, considering the ongoing transformation initiatives.
 

Telstra Corporation Limited

Hit by Nationwide Outage:Telstra Corporation Limited’s (ASX: TLS) stock was down by 1.754 per cent on May 21, 2018 after experiencing another widespread network outage that crippled its 3G and 4G mobile phone networks across Australia region, but the cause is still unknown. On the financial front, the group recorded decent growth in first half of the year wherein total income surged up by 5.9% as compared to previous corresponding period. However, NPAT de-grew by 5.8% to $1.7 Bn in 1HFY18 from $1.8 Bn in 1HFY17. Further, the group re-confirmed its FY18 guidance on total income which is expected to be in the range of $27.6 Bn to $29.5 Bn for full year while EBITDA is expected at the bottom end of the range of $10.1 Bn to $10.6 Bn for same period. The group remains optimistic and stated that they will be able to maintain its 22 cents per share fully franked dividends in FY19, which however is becoming a debatable topic given the available refinancing facilities and earnings scenario. Meanwhile, the share price has declined by 17.04% in past six months and is trading its 52-week low levels. As of now, we give a “Hold” recommendation on the stock at the current market price of $ 2.800.


Financial Highlights (Source: Company Reports)

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