# VTG - Vita Group



## System (1 August 2010)

Vita Group Limited (VTG) is electronics and telecommunications retailer, comprising four brands: T[life], Fone Zone; Next Byte and One Zero.

http://www.vitagroup.com.au


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## Gringotts Bank (30 August 2012)

Any fundamentalist analysts like this one?

Thanks.


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## Klogg (30 August 2012)

Gringotts Bank said:


> Any fundamentalist analysts like this one?
> 
> Thanks.




I don't personally - but I haven't looked into it a great deal...

A friend of mine who also recommended JIN about a year ago is on this one now.


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## Gringotts Bank (30 August 2012)

Thanks klogg.  Some people have that knack.  Hope this one does a JIN.


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## VSntchr (2 November 2012)

This one is flying.

Looks like someone is trying to get a large amount...and there's not many sellers offering many!


I think the profitability of VTG over the next 1 - 2 years is looking very good.

Lots of people rolling off contracts. Lots of people who are yet to get smart phones are finally giving in. Lots of existing smart phone users are getting tempted by the new handsets (SG3, I5 etc)


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## Huskar (20 November 2012)

Yes and the headline figures for last FY look bad because of a $15m writedown. A bit of a hidden gem if you ask me although recent run up has it looking toppy or at least fair value in my opinion if EPS ~4.5-5c for FY13.


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## Knobby22 (20 November 2012)

I wish I had seen the company earlier.
They do seem to be succeeding but I wonder whether it is getting far too bullish at the moment. 
The CEO keeps making positive announcements like he is trying to get the price up.


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## Ves (20 November 2012)

I passed over this at 35-40c and would still do the same.  I still think it's a commodity business that is heavily reliant on Telstra licensing (they operate their regional stores).  One of their big growth drivers also got mentioned in the Choice worst products of 2012 awards. 

I remember the balance sheet looked a bit shaky too. Cash flow is pretty reliable, but not a risk I wanted to take at the time.

That aside, it was very cheap below 40c on a forward earnings basis, and still is fairly cheap now.  Certainly not my thing, as I have a much longer time-frame than 2013-14 earnings.


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## Huskar (28 March 2013)

The price jumped near close after PIE Funds disclosed they had increased their shareholding.

Mike Taylor the guy behind PIE Funds is a pretty switched on guy if you ask me racking up impressive returns over last few years in small-cap space.

Make no bones about it though this is a growth stock not a "set and forget".


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## piggybank (9 August 2013)

Well PIE funds group increased their holding again recently. If it breaks through the resistance @ 70c then who knows where it could go!!


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## catfish (10 August 2013)

piggybank said:


> Well PIE funds group increased their holding again recently. If it breaks through the resistance @ 70c then who knows where it could go!!
> 
> View attachment 53753




In one of their newsletters PIE mentioned they were in talks with VTG over capital management plans. PIE was trying to convince that a special div would attractive investor interest and take advantage of franking credits on hand. 

Obviously those talks went well, I assume something regarding capital management of this sort will be announced at fy result time.

PIE continuing to build their position even at these highs says something is up.


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## Country Lad (10 August 2013)

piggybank said:


> Well PIE funds group increased their holding again recently. If it breaks through the resistance @ 70c then who knows where it could go!!




I can't see a couple of high points 6 years ago still being appropriate resistance points.  I don't know the box size you are using but when it results in only about 20 columns over 5 years, I can't see the chart being that relevant, more like changing box size to find a pattern.  Not exactly what P&F is intended for.

At most charts say that it closed at a 5 year high.

Cheers
Country Lad


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## piggybank (10 August 2013)

Country Lad said:


> I can't see a couple of high points 6 years ago still being appropriate resistance points.  I don't know the box size you are using but when it results in only about 20 columns over 5 years, I can't see the chart being that relevant, more like changing box size to find a pattern. Not exactly what P&F is intended for.
> 
> At most charts say that it closed at a 5 year high.
> 
> ...




Thank you Country Lad for your opinion (and chart) they are always appreciated. You were correct to assume that I don't usually worry about the box size but to try and find a promising pattern. If P&F wasn't intend to find patterns, then was it to keep the noise out? Would you please be as kind as to tell us how do you determine as to what box size to use?

Thanking you in advance of your reply.
PB


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## Country Lad (10 August 2013)

piggybank said:


> Thank you Country Lad for your opinion (and chart) they are always appreciated. You were correct to assume that I don't usually worry about the box size but to try and find a promising pattern. If P&F wasn't intend to find patterns, then was it to keep the noise out? Would you please be as kind as to tell us how do you determine as to what box size to use?
> 
> Thanking you in advance of your reply.
> PB




PB, you are correct in that P&F is used to find patterns.  However, its use is really to look for patterns using appropriate box sizes applicable to the current prices, not changing the box sizes to force a pattern.

Being essentially lazy, instead of commenting here, I will send you to my previous comments on box sizes, .  The whole thread may be of interest to you.

Cheers
Country Lad


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## piggybank (21 August 2013)

Update


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## systematic (13 August 2015)

Just having a look at a 'variation of a theme' of what I usually do but on some international stocks.  VTG was the only ASX stock that came up.  Just for interest...


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## Knobby22 (31 August 2016)

Good result. Huge dividend rise (75%). Gross profit up 18%
 Glad I caught this train.


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## Ves (31 August 2016)

Knobby22 said:


> Good result. Huge dividend rise (75%). Gross profit up 18%
> Glad I caught this train.



Well done.

Looking back on posts,  it looks like I missed a 10 bagger on this one (as it currently stands).

Win some, miss some, lose some!


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## Tightwad (31 October 2016)

Seems people aren't happy with the sqd athletica stores, it does seem a bit of a mis-step. A bit of a black mark against the management and not a lot of info.


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## Knobby22 (31 October 2016)

Tightwad said:


> Seems people aren't happy with the sqd athletica stores, it does seem a bit of a mis-step. A bit of a black mark against the management and not a lot of info.




What is the story? I sold out today as it was really getting shorted.


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## Tightwad (31 October 2016)

they're opening the sqd stores selling fitness clothing and accessories, was only a brief mention in the chairmanl's address.  seems there are only 3 of them at the moment and online.  it seems the kind of thing people would go for.. but i'd rather a lot more detail.  I've been in since .38c and it's a bit of a slap in the face, reluctant to sell now it's pulled back.

hopefully they're testing the waters and not going crazy with it, but seems an odd sideline and quite competitive.  i'm figuring the business is still strong, and this will work or they'll ditch it.  just would have preferred to hear some noises about other ventures first.


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## Newt (31 October 2016)

I'm scaling out too.  
Bit of info here:  
http://www.fool.com.au/2016/10/31/why-the-vita-group-limited-share-price-is-being-hammered-today/


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## peter2 (1 November 2016)

Reminds me of a successful grocery retailer who thought they could sell hardware. Wow.


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## Tightwad (1 November 2016)

yeah i'll be taking a bit more off the table, they should really release some more details to calm things down.


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## Knobby22 (1 November 2016)

Saw in announcements today that Telstra are renegoiating the deal with them.
I think that has a lot to do with it also. Such is the sharemarket. It's annoying to hand back 1/3 of your profit. Glad I got out, the price is continuing to fall. Maybe get back after it settles down.


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## kid hustlr (1 November 2016)

This was the only shining light left in my portfolio and it has just been crunched.

This mkt seems incredible of late some of these mid cap industrial type shares the minute the mkt has any nerves bang 30% drop


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## Tightwad (1 November 2016)

it's a horrible look from management, back to a small spec holding for me.


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## skc (1 November 2016)

Knobby22 said:


> Saw in announcements today that Telstra are renegoiating the deal with them.
> I think that has a lot to do with it also.




Yeah... I think it has everything to do with the recent share price movement.




kid hustlr said:


> This was the only shining light left in my portfolio and it has just been crunched.
> 
> This mkt seems incredible of late some of these mid cap industrial type shares the minute the mkt has any nerves bang 30% drop




Got to put it in a bit of context though... the stock is up from $1.7 12 months ago to a high of $5.80. It's been sold off in the last few sessions but really just going back to the levels it traded since June.


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## Klogg (7 November 2016)

Tightwad said:


> it's a horrible look from management, back to a small spec holding for me.




The risk has always existed... Much like when regulatory risk hit MMS. It was overlooked until it actually threatened to happen.

Given Telstra's potential earnings hole, they may look to plug it by restructuring the agreement... I haven't been able to find anything on the specifics between the VTG/TLS (I assume it's confidential), but it must be profitable in its current state for TLS to maintain it for so long.

Given the agreement exists until 2020, and VTG have so many stores, I think TLS have less of an upper hand than the market believes...


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## skc (7 November 2016)

Klogg said:


> The risk has always existed... Much like when regulatory risk hit MMS. It was overlooked until it actually threatened to happen.
> 
> Given Telstra's potential earnings hole, they may look to plug it by restructuring the agreement... I haven't been able to find anything on the specifics between the VTG/TLS (I assume it's confidential), but it must be profitable in its current state for TLS to maintain it for so long.
> 
> Given the agreement exists until 2020, and VTG have so many stores, I think TLS have less of an upper hand than the market believes...




The negotiations should be done confidentially but it was leaked by someone... and hence the share price hammering before the announcement. I'd be look for the stock to reverse for signs that negotiation has worked out for VTG... assuming that if it leaked once it would leak again.

Re: relative power between TLS and VTG. Do you have an idea what % of revenue / profits come from Telstra for VTG? I can't find that information after 10 minutes in the last annual report... is there any meaningful diversification at all? Someone like RCG would be an example of someone who's done much better job a diversification. 

There's an analysis framework called Porter's 5 forces re relative power along a supply chain. All else being equal, the relative business between the 2 entities is an important factor. Whilst I haven't found the exact number, I bet you TLS is a bigger part of VTG's business than VTG is for TLS. 

Perhaps the relationship is not dis-similar to say CKF having licenses for KFC / Yum! or CCL with licenses to bottle coke. But in TLS's case there seems to be little reason why they can't run their own retail stores. 

VTG is trading like the concentration risk is being priced-in but not quite that the market has bet on a negative outcome. Interesting to see how this works out.


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## Klogg (7 November 2016)

skc said:


> The negotiations should be done confidentially but it was leaked by someone... and hence the share price hammering before the announcement. I'd be look for the stock to reverse for signs that negotiation has worked out for VTG... *assuming that if it leaked once it would leak again.*




Hadn't considered that, good point.



skc said:


> Re: relative power between TLS and VTG. Do you have an idea what % of revenue / profits come from Telstra for VTG? I can't find that information after 10 minutes in the last annual report... is there any meaningful diversification at all? Someone like RCG would be an example of someone who's done much better job a diversification.




Not really sure if this is the best way of doing it, but this line should be correct:
"Revenues of $183,768,546 (FY15:$151,828,811) are derived from a single customer."

That seems to be somewhat in line with the "Fee and commission revenue" line on the P&L:
FY16: $179.7m
FY15: $147.2m

I'd need to go further back to have confidence that correlation stands, but it would make sense.

Also, the definition of Fee and Commission revenue from Note 3:


> _Fee and commission revenue_
> 
> Fee and commission revenue from the telecommunications provider is recognised when a customer contracts to an
> eligible plan with the telecommunications provider using the Group as an agent for the telecommunications provider.




At a guess, it'd be this revenue + some of the the "Cooperative advertising revenue" listed in Note 3.





skc said:


> VTG is trading like the concentration risk is being priced-in but not quite that the market has bet on a negative outcome. Interesting to see how this works out.




Agreed, not much of a discount on offer from what I currently know, but needs more work on my behalf.


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## Sway (8 November 2016)

The CEO selling 10m shares on 20th Sep (at around $5.15) has failed to raise many eyebrows?


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## Klogg (8 November 2016)

Sway said:


> The CEO selling 10m shares on 20th Sep (at around $5.15) has failed to raise many eyebrows?




FWIW - they were sold at $4.95.
I agree it's not a good look, but she still holds ~25m shares. I don't think timing had anything to do with it though - at that point it was trading close to 20* earnings...

Another director sold 71k shares at the time as well.


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## Sway (8 November 2016)

Klogg said:


> I agree it's not a good look, but she still holds ~25m shares. I don't think timing had anything to do with it though - at that point it was trading close to 20* earnings...




I still had enough confidence to top up during the late August dip, but when the CEO pulled $50m off the table a month later, I got cold feet.  Luckily!


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## skc (28 November 2016)

skc said:


> The negotiations should be done confidentially but it was leaked by someone... and hence the share price hammering before the announcement. I'd be look for the stock to reverse for signs that negotiation has worked out for VTG... *assuming that if it leaked once it would leak again.*




Interesting how this panned out. Last Thursday it went on a surge with some conviction (up >8.5%), and what do you know... an announcement was made the very next day which saw the stock spike another 20% upon resumption.





Today's action was a bit unexpected. I actually dialled into the conference call (anyone can do it as a private investor). The call actually revealed very little information - everything was commercial-in-confidence and will be advised in due course. Nothing about how much margin is reduced, or how many new stores they'd get. The market is left with no choice but to make it's own interpretation. With the stock reversed some 20% south thru the day, the interpretation was not bullish!

The Chairwoman Maxine did mention something to the effect that "We are aware of analyst forecasts for the company and we are aware of our disclosure obligations". But I don't know how much comfort one can take from that. VTG is not a well covered stock, and the proposed changes won't take effect until Feb next year. So the chance of VTG's next set of numbers falling within the range of analyst estimates at the next report is pretty high.

I think the market probably has this one more right than wrong... i.e. still not a bargain. Been decent trading this name but borrow is hard to come by at times.

P.S. The conference call audio quality was soooo terrible. Seriously... in 2016, the age of internet, Siri, Fakebook and the like... and we get a conference call with poorer audio clarity than "One small step for man, one giant step for mankind". AND by the Telco company FFS  What's wrong with a webcast so everyone can listen in on their computer rather than a phone for starters?! Were they just trying to be retro?!


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## Klogg (29 November 2016)

skc said:


> The Chairwoman Maxine did mention something to the effect that "We are aware of analyst forecasts for the company and we are aware of our disclosure obligations". But I don't know how much comfort one can take from that. VTG is not a well covered stock, and the proposed changes won't take effect until Feb next year. So the chance of VTG's next set of numbers falling within the range of analyst estimates at the next report is pretty high.
> 
> *I think the market probably has this one more right than wrong... i.e. still not a bargain.* Been decent trading this name but borrow is hard to come by at times.
> 
> P.S. The conference call audio quality was soooo terrible. Seriously... in 2016, the age of internet, Siri, Fakebook and the like... and we get a conference call with poorer audio clarity than "One small step for man, one giant step for mankind". AND by the Telco company FFS  What's wrong with a webcast so everyone can listen in on their computer rather than a phone for starters?! Were they just trying to be retro?!




That sums it up very well. After the call, your statement (in bold) is very accurate.

The only thing I'd add to this is there were a few analysts keen on asking about their pilot, over and over and over...
One of them even asked if the charges for TWO stores would be charged as capex or opex. Given it's two stores, how much can the damn thing even cost?


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## Knobby22 (29 November 2016)

As you say we really are in the dark.
when you don't know what is happening then it's important to look at the price action.
In this case it is not very positive so I am going to continue to stay out and wait.


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## skc (17 May 2017)

Knobby22 said:


> As you say we really are in the dark.
> when you don't know what is happening then it's important to look at the price action.
> In this case it is not very positive so I am going to continue to stay out and wait.




6 months on and a horrid month for VTG... announcement out today that Telstra wants to reduce remuneration by 10% come July, then 10% in FY19 and FY20.

VTG's response? We have absolutely nothing to fall back on... so we will just keep a positive attitude and roll over and cop it. Anyone who thought VTG might have some clout in their discussion with TLS were sadly mistaken, and that probably included the CEO.

I am assuming that VTG can still make money based on these metrics? How much fat was in there in the first place? Or may be TLS's goal is simply to offer them no return, so VTG will just give up on their stores when the master agreement expires in 2020? 

Even if they can continue beyond 2020, what's their store footprint going to be like? What business (or share price) can survive a 30% reduction in income AND some uncertain cut to the number of stores? 

What a tragic business model...


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## Ves (17 May 2017)

skc said:


> What a tragic business model...



There's lot of these kinds of stories littered through out the history of retail.  You gain an exclusive right to do something with someone else's product or brand (ie.  open stores and sell it in a certain region or area).  Generally that someone granting the rights is an industry elephant,  but the region or area in question,  is outside of their core operations.

It's fantastic on the way up,  the smaller company gets to piggy back the big brand exposure, and sometimes it looks like a kind of a temporary competitive advantage.

But there comes a time when something has to give.  You become way too successful, the exclusive rights become more appealing to the owner or someone else.  You might lose them.

Alternatively, the brand owner's business hits industry head winds and you're still reaping a decent margin?  They'll just reduce the cut you get.  It's free money to them.  What leverage do you have over them?  Not much,  I'd have thought.

There's so many potential doomsday scenarios in these types of operations that the tail risk is too hard to ignore.

It's OK to buy them,  but make sure you account for sizeable risk in your valuation.


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## skc (17 May 2017)

Here's a piece from Roger Montgomery's team from 2 days ago.

https://rogermontgomery.com/why-we-continue-to-hold-vita-group/


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## icemanmelb (17 May 2017)

SKC,
Its hard to not talk up one's book to prove that they are indeed correct in their valuation. What's important is that management can communicate with shareholders in terms of future plans. Fluff like positive attitude should be left to motivators such as Anthony Robbins.

Ice


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## Rainman (18 May 2017)

10% reduction in commissions and fees this year and again for the next 2 years.  If that happens (and assume that it will), what is VTG's sustainable earnings power?  I estimated it elsewhere at around $17 million in EBITDA.  Give VTG a 10 x multiple and you're look at an EV of around $170 million which works out to be around $1.15 a share. 

But I readily admit this could be optimistic because there is a good chance that the market has woken up now and will never again accord VTG an EV/EBITDA multiple of 10 which is about standard for the retail industry.


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## skc (18 May 2017)

Rainman said:


> 10% reduction in commissions and fees this year and again for the next 2 years.  If that happens (and assume that it will), what is VTG's sustainable earnings power?  I estimated it elsewhere at around $17 million in EBITDA.  Give VTG a 10 x multiple and you're look at an EV of around $170 million which works out to be around $1.15 a share.
> 
> But I readily admit this could be optimistic because there is a good chance that the market has woken up now and will never again accord VTG an EV/EBITDA multiple of 10 which is about standard for the retail industry.




There isn't quite enough detail, but a crude first cut is something like this.

At half year VTG earned $103m fee and commission. Take a 30% cut on that which drops straight to the bottom line you basically get $0 PBT.

There will be potential areas to offset these... like higher cross sell (hard work with a less incentivised team) and lower costs. So I have $10m NPAT as a finger-in-the-air, best case guess. Compare that to the current market cap of $138m... it's not an obvious bargain.

Then you have got the looming footprint change... and the fact that the company might waste more capital and expand into grossly overpriced men's active wear. 

Hard to make an investment case without wildly optimistic assumptions and outcome even at current prices.

P.S. The VTG logo has... believe it or not... bubbles.


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## Ves (18 May 2017)

skc said:


> At half year VTG earned $103m fee and commission. Take a 30% cut on that which drops straight to the bottom line you basically get $0 PBT.



If it's 10% at the start of every year is it a 27.1% cut in total?

I guess it only makes a few million bucks in difference,  but every little bit counts...


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## skc (18 May 2017)

Ves said:


> If it's 10% at the start of every year is it a 27.1% cut in total?
> 
> I guess it only makes a few million bucks in difference,  but every little bit counts...




Yes but the back of napkin doesn't fit so many digits for calculations.

Either way, not really something you can hang your hat on....


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## VSntchr (29 May 2017)

SP on a tear the last few sessions.
A 6m unit cross trade at 85c seems to have sparked it. Then an announcement today on a 100k director buy at 87c.


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## Rainman (29 May 2017)

Lot of insider buying of this name at sub $1.  Simpson, Osborne and Wilson are all directors and all have topped up their super and direct accounts via on-market purchases.  

A sign that negotiations with Telstra are not as bad as the market perceives?  Or merely insiders averaging down?  Only time will tell.


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## skc (29 May 2017)

Rainman said:


> Lot of insider buying of this name at sub $1.  Simpson, Osborne and Wilson are all directors and all have topped up their super and direct accounts via on-market purchases.
> 
> A sign that negotiations with Telstra are not as bad as the market perceives?  Or merely insiders averaging down?  Only time will tell.




There are 2 types of directors buying.

A. Directors see a real bargain and buy the stock.
B. Directors see share price taking big hits and buy the stock _in hope of propping up the share price_.

When multiple directors buy on-market at the same time and release the Appendix 3Y as soon as they could, I would guess the intent is more B than A. Doesn't mean the share price won't react, but implying too much into how the company is traveling fundamentally would simply be.... too much. 

For the record, 3 directors bought recently: Osborne ~$60k, Simpson ~$18k, Wilson $87k. I'd be a lot more interested if Maxine buys a few $m on market.... that would be telling me something.


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## Rainman (29 May 2017)

skc said:


> There are 2 types of directors buying.
> 
> A. Directors see a real bargain and buy the stock.
> B. Directors see share price taking big hits and buy the stock _in hope of propping up the share price_.
> ...




As I said, only time will tell.


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## Ves (29 May 2017)

Director buying/selling is an interesting topic.

I've never really taken either action because a director has done it first.

With relation to taking cues from directors even if you could trust their 'reputation'  there's no visibility (unless they're willing to disclose) on all of the important stuff such as their valuation basis,  their expected return hurdle,  their time frame,  their reasons etc. Just because they're a director doesn't mean they're an expert investor. It could be the exact opposite.

I'd be way more comfortable with coming up with my own thesis for buying/selling and holding myself accountable to this rather than reacting to what someone else is doing.


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## skc (29 May 2017)

Ves said:


> I've never really taken either action because a director has done it first.
> 
> With relation to taking cues from directors even if you could trust their 'reputation'  there's no visibility (unless they're willing to disclose) on all of the important stuff such as their valuation basis,  their expected return hurdle,  their time frame,  their reasons etc. Just because they're a director doesn't mean they're an expert investor. It could be the exact opposite.




The ASX listing rule states that director trading must be disclosed for corporate governance reasons. And the reason that it is an important corporate governance issue is because all directors are insiders. If they are not insiders they are by definition not performing their director duties.

So director trading can be important, not because they may or may not be expert investors, but because they are insiders. Large director sales do matter, based on piece of research by Wilson in Jan this year which looked at Director activities in 2016.












Ves said:


> I'd be way more comfortable with coming up with my own thesis for buying/selling and holding myself accountable to this rather than reacting to what someone else is doing.




Absolutely... It certainly isn't a sufficient condition for changing your investment, but it can provide further information.


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## Rainman (29 May 2017)

skc said:


> The ASX listing rule states that director trading must be disclosed for corporate governance reasons. And the reason that it is an important corporate governance issue is because all directors are insiders. If they are not insiders they are by definition not performing their director duties.
> 
> So director trading can be important, not because they may or may not be expert investors, but because they are insiders. Large director sales do matter, based on piece of research by Wilson in Jan this year which looked at Director activities in 2016.
> 
> ...




Agree.  Insider buying or selling is one factor among many to look at in circumstances like the present when a company's stock has undergone a large decline and the market is still digesting the news.  Market prices generally tend to overshoot on the downside and the upside following significant events like that which has hit VTG.  

That said, the purchases by these directors at 0.90 cents per share or thereabouts so far appears to be proving fairly astute.


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## Value Hunter (29 May 2017)

Roger Montgomery (and his team who parrot his views) is a muppet who is always late to the party and backwards looking with his analysis and most of the time his analysis is incredibly flawed and leaves out vital risks. He and his team have no real conception of how to analyze businesses or business risk. He f***ed up many times. He was blatantly wrong about Matrix composites and Engineering, wrong about The Reject Shop, wrong about Vocus, wrong about Vita Group and so many others. He always tries to sound so smart and so assured with his analysis. He always makes high risk business that are having their moment in the sun sound low risk and dependable. Everyone makes mistakes from time to time but his arrogance and smugness really irks me.

Not too mention previously their software Skaffold gave Vita Group their highest rating of "A1" which mislead naive subscribers into thinking it was a top quality low risk business when it was plainly speculative and had a weak/risky business model all along. The team at Montgomery Investment Management really are a bunch of snake oil salesmen.


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## Value Hunter (29 May 2017)

I know this rant is a bit of topic but look at the marketing material on the page of one of their funds (Montaka Global Fund) 

"In addition to the diversification benefits of international companies and foreign currencies, should the market suddenly drop by a hypothetical 10 per cent, the above example produces an expected decline of approximately four per cent.

As a result of this decreased net market exposure, Montaka carries significantly less market risk compared to many of its typical equity fund peers. In fact, some investors might view Montaka as a substitute for fixed income bonds, rather than as an equity investment."

They are trying to subtly imply that their global long short fund has the same risk profile as a bond fund. That is absolutely absurd.


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## skc (29 May 2017)

Value Hunter said:


> Roger Montgomery (and his team who parrot his views) is a muppet who is always late to the party and backwards looking with his analysis and most of the time his analysis is incredibly flawed and leaves out vital risks. He and his team have no real conception of how to analyze businesses or business risk. He f***ed up many times. He was blatantly wrong about Matrix composites and Engineering, wrong about The Reject Shop, wrong about Vocus, wrong about Vita Group and so many others. He always tries to sound so smart and so assured with his analysis. He always makes high risk business that are having their moment in the sun sound low risk and dependable. Everyone makes mistakes from time to time but his arrogance and smugness really irks me.
> 
> Not too mention previously their software Skaffold gave Vita Group their highest rating of "A1" which mislead naive subscribers into thinking it was a top quality low risk business when it was plainly speculative and had a weak/risky business model all along. The team at Montgomery Investment Management really are a bunch of snake oil salesmen.




ISD, LYC and ORL are three other names that come to mind. He has a formula that simply extrapolates the present without taking into account that the real world is dynamic and full of risks. 

It's perfectly OK to trade/invest in business/industry trend and/or momentum... it's dangerously wrong to sell that like he's Buffet-lite.

Someone should run an analysis of all his A1 stocks over the years and see if there's an edge on the short side....


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## Value Hunter (29 May 2017)

Exactly. He really misleads people into thinking that they are taking less risk then they actually are. Nothing wrong with taking risks but do not try and sell high risk investments to naive investors as being low risk.


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## Rainman (1 June 2017)

I see Marine Horne has added to her position in VTG recently. She now controls 18.7% of the voting stock - up from 17%.  Another director, Watts, also added.

That's five insider buys in the last week.


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## Rainman (1 June 2017)

Value Hunter said:


> ... He really misleads people into thinking that they are taking less risk then they actually are...




Montgomery's biggest failing is that he blabs too much about his positions.  And because he has a large retail following, the your-money-your-call crowd often buy his positions and get burnt when they tank - like they did with VTG, HSO, ISD.  These are all stocks that Montgomery has talked about regularly as being top quality "A1" businesses.  And a case can be made that they are, but not at 20, 25 or 30 times forward earnings.  

I have actually discussed with Montgomery his apparent willingness to "pay up" for businesses that he perceives as being of quality.  Montgomery and many other managers have really been influenced by Buffett in this regard after Buffett was himself influenced by Charlie Munger.  Summed up, this investment philosophy is: It is far better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price. 

While this idea justifies "paying up" for a quality business, it can just as easily lead to overpaying for quality.  But usually the overpaying only becomes apparent later when the business does not perform as well as it was priced to perform, resulting in the stock price tanking.  

I am not sure what Montgomery paid for VTG but it is certainly higher than where it is trading today - a lot higher, I suspect.  And yet, given VTG's risky business model, it is only at or around today's price (and probably lower) that I think any serious case can be made for it offering an excess of value over price.


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## skc (2 June 2017)

Rainman said:


> I see Marine Horne has added to her position in VTG recently. She now controls 18.7% of the voting stock - up from 17%.  Another director, Watts, also added.
> 
> That's five insider buys in the last week.




Yes Maxine's purchase definitely pipped some interest.



Rainman said:


> Montgomery's biggest failing is that he blabs too much about his positions.  And because he has a large retail following, the your-money-your-call crowd often buy his positions and get burnt when they tank - like they did with VTG, HSO, ISD.  These are all stocks that Montgomery has talked about regularly as being top quality "A1" businesses.  And a case can be made that they are, but not at 20, 25 or 30 times forward earnings.




A1 business is an A1 business, whether it trades at 5x, 30x or is unlisted. Share price doesn't come into the analysis of whether a business is A1. The price you pay affects the investment returns for the individual investor, but it doesn't affect the company's internal return.

Here's a list of A1 businesses back in Sept 2011... most of these names are not A1 businesses regardless of the share price or market multiple.

https://rogermontgomery.com/wp-cont...ompares-to-Goldman-Sachs-Top-10-Sept-2011.jpg

Indeed, the average return of these 10 stocks was -21% between Jan 2011 to yesterday, including dividends. The change in EPS between FY11 and FY16 for this basket was -51%. I challenge anyone to do worse with 10 randomly selected ASX300 stock.


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## Value Hunter (3 June 2017)

Skc that table should be mandatory viewing for all subscribers to his Skaffold service and for investors in his funds. From an earnings perspective even the best performer on the list, JB Hi-Fi only managed to increase earnings by around 4.5% per annum compound.


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## Gringotts Bank (8 June 2018)

@greggles  any thoughts on the fundamantals?


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## greggles (8 June 2018)

Gringotts Bank said:


> @greggles  any thoughts on the fundamantals?



Interesting company. I haven't had much of it a look at it until now. They seem to operate a diverse group of businesses and have been punished by the market since September 2016. Looking at their last half year report their NPAT is about half that of the prior corresponding period. No idea about their FY18 outlook as they haven't provided any guidance that I can see. FY17 NPAT was $39 million.

If FY18 NPAT turns out to be better than expected then it could be a good buy at current levels, but if it disappoints the share price might slump again. Market cap is only $160 million, so downside might be limited.


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## Country Lad (8 June 2018)

VTG price bombed from around $5 to around 90 cents over 8 months as Telstra changed their agreement with VTG.   The price has fluctuated since, in my view, because of the uncertainty regarding the agreement.  The agreement has been extended to 30 June 2023, and with rolling annual extensions after this date.

However, the agreement is subject to an annual review by Telstra, which will include Vita’s performance against key metrics. A minimum of three-year’s notice is to be provided by either party, should they wish to cease the agreement at the relevant expiry date.

Telstra retains the right to amend remuneration up or down to reflect, in their words, changing market conditions and product lifecycle changes.  Additionally, there is also no certainty regarding Vita’s level of income from Telstra past 2023.

I suspect that the slow drop in share price over the past 4 months relates to the uncertainty regarding the income from Telstra in the immediate future.

VTG operates 110 Telstra stores and when I look at the poor customer relations Telstra has with telecom customers, they would be really hopeless at operating all those the retail outlets themselves should the agreement with VTG fall over. So you have to wonder if Telstra don’t need VTG more than VTG needs Telstra, particularly as Vita diversifies.

Vita has obviously had a critical look at its future and the uncertainty, so last year acquired Clear Complexions as part of the strategy to diversify into what they call non-invasive medical aesthetics (NIMA) $1bil market.


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## greggles (8 June 2018)

Thanks for that summary of Vita Group, Country Lad. Very informative.


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## notting (3 August 2018)

As Apple hits a Trillian dollars VTG has put in a decent base.
Over the years has done well when Apple and the smart phone market is alive and well!!, but got trashed due to fears about TLS.  Those fears are rather over done I feel.
Good that SPHERIA ASSET MANAGEMENT who do their homework at the smaller end of the market has taken a decent stake!! (as has Pinnacle)


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## Mr Bear (3 August 2018)

This company is a complete flop, it’s important to be able to measure risk and it’s near impossible to measure the contract risk or diversification risk  this business has.. Telstra have effectively outsourced responsibility for profitable business they could do themselves, another CEO could determine Telstra are better off attempting to earn all the profits.

This isn’t to say you can’t make money from this stock but the risk isn’t worth it.


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## notting (3 August 2018)

Mr Bear said:


> Telstra have effectively outsourced responsibility for profitable business they could do themselves




Telstra tried and failed to do it themselves.  The shops are a slick operation. the problem is that Telstra is almost all the business and so any perceived threat of Telstra trying to take it back is catastrophic. Business is going just fine in the mean time and Telstra would be better leaving it in place and working on mobile tower tech building and maintenance or something like that!
Customer service and sales has never really been Telstras thing!!


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## Mr Bear (4 August 2018)

notting said:


> Telstra tried and failed to do it themselves.  The shops are a slick operation. the problem is that Telstra is almost all the business and so any perceived threat of Telstra trying to take it back is catastrophic. Business is going just fine in the mean time and Telstra would be better leaving it in place and working on mobile tower tech building and maintenance or something like that!
> Customer service and sales has never really been Telstras thing!!



Agree with all of your comments, if I’m a Telstra shareholder and I see Vita growing revenues and profits at the rate they were I’m asking the board why we aren’t just doing this ourselves. The last contract negotiations are an example of how Telstra will continually put a handbreak on the real growth potential of the business and therefore you can’t clearly determine the risk. If this was a standalone franchise model I’m a buyer


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## notting (17 August 2018)

Very strong week, very strong day, exceptionally strong close. 






This thing can cover a lot of territory in very short time spans when it runs!!!
Important to consider that Telstra is looking to 5G not selling handsets and deals.
VTG looking just fine!


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## notting (21 August 2018)

Having another ripping day.


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## barney (21 August 2018)

notting said:


> Having another ripping day.




Nice looking Chart!


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## greggles (26 October 2018)

Vita Group bouncing back today after the company announced that it expects to deliver EBITDA of around $23 million to $24.5 million for the six months to 31 December 2018, representing a 15 to 23 per cent increase on the prior year. VTG also expects EBIT to be around $18 million to $19.4 million, up 15 to 24 percent from the prior period.

Finally some positive news for VTG. The share price is currently up 23% to $1.07. It will be interesting to see if it can stay and consolidate above $1 in the short term.


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## notting (13 June 2019)

I really was struggling to understand why this thing was firing up so much since November last year.
It makes almost all it's money from Telstra contacts often associated with Iphone sales.
Why would it be rallying when Apple recently announced less emphasis on hardware sales and more on affiliated environment apps and so on.
I started shorting it.
Then they made this announcement after the market closed on June 7 



> Under the new remuneration arrangements, Vita expects to enjoy higher remuneration attached to the  sale  of  devices,  including  smartphones,  tablets,  connected  devices,  wearables,  and  non-transactional performance metrics. Conversely, Vita expects to see lower remunerationfrom sales of connections to the Telstra network.




Looks like the market didn't like it!!! -


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## jonnycage (18 December 2019)

back up yearly comp pick -   looking for Vita group to find a better way forward in 2020 - after the amendments to their Telstra agreement took the wind out of their sails


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## finicky (21 February 2020)

FY20 interim result. My half baked take:
On the face of it just treading water, but that's ok I guess if they keep up the dividend - almost 7% ff on today's closing price.
They still project confidence to the share market that the skin business (SHAW = Skin Health and Wellness) has potential as it scales up. SHAW running at a small loss.
Record group revenue. The sales of telecom devices and extras is partly compensating lower remuneration from Telstra for plan sign-ups, albeit at less profitable margin.
Share price reaction: quite big gap up on high volume

Held
Sentiment: hold

....................... .....*1H20  1H19  %CHG*

*EBITDA* (pre-AASB 16) 26.4, 25.0, +5%
*Group NPAT* 14.5, 14.1, +3%
*Interim dividend* (cps) 5.3 cps, 5.2 cps, +2%
*Earnings per share* 8.9 cps, 8.8 cps, +1%

1 year daily


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## finicky (21 August 2020)

Not a true breakout I guess - needs a close above 1.20?
Reported well for fy20 given the wuhan virus impacts on a largely retail business.
Reported earnings per share fy20, 13.7 cps, *down only 9% on fy19.*
Paying a small final dividend (2.4c) after cancelling the interim one.
Jobkeeper helped.

Held

VTG 6 Months


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## finicky (11 February 2021)

A sickening blow
Held


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## finicky (30 April 2021)

Some annoying interest stirring in Vita Group on a general down day.
A 'bottom-up' fundamental conviction investment fund manager Ryder Capital, which also has an asx LIC (RYD) has notified an initial substantial holder interest. RYD - not a bad chart ( #2 attach below)

I almost bid to double my small holding (5,000) this week after reading a very persuasive commentary from an astute someone elsewhere that VTG is well undervalued and is likely to have its telstra branded shops resumed early by telstra for 2.5 x ebitda, which would mean that, after CGT tax, VTG would be worth substantially more in its cash account than its current market value - $200M vs $140M + would  still have its skin cosmetician business.

Doubt that I'll chase the price up, the bid queue is moving against my intention.

Held


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## finicky (21 May 2021)

Continuation of reversal trend. Daily volume on a rising trend, new higher high, break above the final swing high of the preceding downtrend.    

Daily


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## Dona Ferentes (24 September 2021)

Vita Group will pay a special dividend of up to 45c a share thanks to the decision to sell its retail telco business to Telstra.

Vita has been a long-time operator of a collection of Telstra-branded stores, but earlier this year Telstra confirmed it intended to bring its retail network back to a company-owned model.

Vita confirmed on Friday that it had done a deal with Telstra and will be paid $110 million in cash. Shareholders will get between $65 and $75 million of the Telstra cash.

Telstra will take on the employment responsibilities for staff and managers who work in those stores as well as staff in their Sprout tech accessories business (around 1,170 people).

Vita has been preparing for this moment and from 2017 started repositioning the business with the purchase of skincare and beauty treatments businesses.


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## finicky (24 September 2021)

Telstra must have put Maxine's nuts in a vice for VTG to accept the price. Maybe Telstra's leverage was retaining All of Vita's staff in continuing roles. Hard to argue against that if so. Predatory stuff. I won't break even on the deal after a few years hokding. Doubt that I will keep my shares for a stake in the remaining beauty business - beauty comes from within, as I demonstrate every day. The sophisticated theorizers on the ICU takeover value were way off although they clearly saw that a buyout would happen.


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