VOC - Vocus Group

[Triathlete]

Yes they did,the report is much longer and the metrics that they use must be met which in there view will be outside what is required for this company. I have just used the shortened version.

 

[joeno]

What's happening to this stock sounds a bit like what happened to Slater and Gordon. Anyone have more details about this co's issues?

 

[Klogg]

What's happening to this stock sounds a bit like what happened to Slater and Gordon. Anyone have more details about this co's issues?

Negative sentiment, plus some other small/short-term issues that have arisen:

- 2nd Singapore/Perth cable announced
- Potentially won't meet guidance (according to Lincoln Stock Doctor)
- TPG winning at auction for 700MHz (4G) - potentially impacts Vocus as a mobile reseller

To me, this is mostly irrelevant. Provided the cable achieves a reasonable return on investment, and the company keep loading up additional users onto their fiber network, the rest a sideshow. If sales figures continue as they are (especially in the wholesale/enterprise unit), increased EBIT margin should start to show.

But you need a longer time frame than 6 months - which seems extremely rare at this point.

Edit: FWIW - the SGH analogy is ridiculous.

 

[Klogg]

Yes they did,the report is much longer and the metrics that they use must be met which in there view will be outside what is required for this company. I have just used the shortened version.

The funny part is, they end it with this:
"...we have decided to remove the business as a Borderline Star Growth Stock with a final valuation of $4.15."

So the company trades at an ~30% discount to their 'valuation' (which seems extremely precise, to say the least), and they decide to remove it from their portfolio. Interesting decision to say the least...

 

[Triathlete]

The funny part is, they end it with this:
"...we have decided to remove the business as a Borderline Star Growth Stock with a final valuation of $4.15."

So the company trades at an ~30% discount to their 'valuation' (which seems extremely precise, to say the least), and they decide to remove it from their portfolio. Interesting decision to say the least...

Well if you are a Fundamental value investor just load up with more stock....I am sure it will come good in a couple of years....In the meantime I will just trade it based on the technical aspect....

 

[Klogg]

Well if you are a Fundamental value investor just load up with more stock....I am sure it will come good in a couple of years....In the meantime I will just trade it based on the technical aspect....

Oh I wasn't taking a crack at you, just at Lincoln. If your system works, who am I to tell you otherwise.

 

[galumay]

Lincoln are in the same boat as the Fools and Dodgy Roger IMO. Amazes me that people pay for the nonsense they put out.

(and, yes, the irony is pretty rich that once they trade at a discount to value the so called value investing website dumps them!!)

 

[Triathlete]

Oh I wasn't taking a crack at you, just at Lincoln. If your system works, who am I to tell you otherwise.

Ok I see....

Lincoln are in the same boat as the Fools and Dodgy Roger IMO. Amazes me that people pay for the nonsense they put out.

(and, yes, the irony is pretty rich that once they trade at a discount to value the so called value investing website dumps them!!)

Why do you say that?? I would have thought if the service was not up to scratch they would have been out of business a long time ago.

If I was just a fundamental investor I might agree with you to a certain extent but since I use the service to give me another angle to my Technical analysis the service works fine for me..

From what I understand about fundamentals , just because a company trades at a discount it does not make it a good investment at that point in time. I also do not think that those that use fundamentals invest in companies to see the share price drop in price from when they entered the market....just an opinion of course.

 

[Triathlete]

The news about TPG and their mobile network was well known prior to the official release so not sure how much impact the release of the 'news' really had. I think the negative sentiment around telcos generally is pretty strong, I took a position in VOC at the low 4's and am not surprised its fallen further. It will take a couple of positive reporting sessions to see a real turn around IMO.

Dealing every day with the structural dysfunction and incompetence of TLS and TPG makes me think there is plenty more bad news for the major telcos in the future!

So in this situation what is your next move ???

I mean if you are not surprised by the fall ,your analysis must have told you something different that was favourable for this investment in the first place...

As a fundamental investor do you revisit your analysis, or just hold for the turnaround no matter how far it falls (remember SGH) who knows what is going on inside this company they do not tell you everything in reports....or do you Buy more stock to average down or bite the bullet and close the position for now take your loss and re-enter when the company makes the turnaround however long that takes....I like to know from a fundamental investors view....

 

[galumay]

Why do you say that?? I would have thought if the service was not up to scratch they would have been out of business a long time ago.

There seems to be plenty of these type of services, a basic knowledge of human psychology explains why they remain in business!!

From what I understand about fundamentals , just because a company trades at a discount it does not make it a good investment at that point in time. I also do not think that those that use fundamentals invest in companies to see the share price drop in price from when they entered the market....just an opinion of course.

In my experience most genuine fundamental investors are of the belief that if a company is trading at a discount to its intrinsic valuation range then it is likley a good incvestment at that point in time. For a mob like Lincoln to say, "oh, its now trading at well below what we believed it was worth, we are going to stop coverage of it." is entirely at odds with FA IMO!. I believe, like other long term investors that use a FA approach, that a drop in price below fair value range is just another opprotunity to own more of the company at a discount. We know the market is irrational and volatile, if we have done our research, analysis and due diligence then what is there to fear in a falling price?

So in this situation what is your next move ???

Every situation is different IMO Triathlete, in the case of VOC its in a sector I dont think is a particularly attractive one from a business or investment point of view, so it wasnt a business that was on my radar to be invested in. It fell sufficiently in price to become substantially mis-priced by the market IMO, and was trading well under the range of valuation I had calculated, so I took a position.

Given the headwinds, and negative sentiment towards the sector I thought it would be some time before the market re-rated it (years), and I am happy to hold unless something arises to change my analysis. I revisit the analysis of all my decisions regularly, whether or not that is enough to prevent an event like SGH remains to be seen - as I have detailed elsewhere, I am not sure I would have done much differently there even after the experience. Its such an easy bias to fall into - to convince ourselves that we have learnt from our mistakes - when in reality people very rarely honestly even know what the mistake was!

Sometimes I will average down, but in the case of VOC that would mean being more heavily invested than I am comfortable with in the sector, so at this stage I will happily hold and as I have found many times, patience is a very rewarding master!

As Klogg has said, regarding the critisism of Lincoln, its not personal, you obviously have a clear and detailed strategy you believe in and follow, your posts are ones I always read - absorbing different world views and approaches to investing is always valuable!

 

[mcgrath111]

Ive averaged down to 3.75.
Whole sector is feeling it, look at TPM down 16% or TLS.
Given VOC has been the biggest dog, nothing has come to light that has justified the drop from results SP ( which got it to about 4.60?) And were now at 3.08
Dont understand the flames and I cant see the smoke; maybe the house isnt on fire after all?

 

[Triathlete]

There seems to be plenty of these type of services, a basic knowledge of human psychology explains why they remain in business!!



In my experience most genuine fundamental investors are of the belief that if a company is trading at a discount to its intrinsic valuation range then it is likley a good incvestment at that point in time. For a mob like Lincoln to say, "oh, its now trading at well below what we believed it was worth, we are going to stop coverage of it." is entirely at odds with FA IMO!. I believe, like other long term investors that use a FA approach, that a drop in price below fair value range is just another opprotunity to own more of the company at a discount. We know the market is irrational and volatile, if we have done our research, analysis and due diligence then what is there to fear in a falling price?



Every situation is different IMO Triathlete, in the case of VOC its in a sector I dont think is a particularly attractive one from a business or investment point of view, so it wasnt a business that was on my radar to be invested in. It fell sufficiently in price to become substantially mis-priced by the market IMO, and was trading well under the range of valuation I had calculated, so I took a position.

Given the headwinds, and negative sentiment towards the sector I thought it would be some time before the market re-rated it (years), and I am happy to hold unless something arises to change my analysis. I revisit the analysis of all my decisions regularly, whether or not that is enough to prevent an event like SGH remains to be seen - as I have detailed elsewhere, I am not sure I would have done much differently there even after the experience. Its such an easy bias to fall into - to convince ourselves that we have learnt from our mistakes - when in reality people very rarely honestly even know what the mistake was!

Sometimes I will average down, but in the case of VOC that would mean being more heavily invested than I am comfortable with in the sector, so at this stage I will happily hold and as I have found many times, patience is a very rewarding master!

As Klogg has said, regarding the critisism of Lincoln, its not personal, you obviously have a clear and detailed strategy you believe in and follow, your posts are ones I always read - absorbing different world views and approaches to investing is always valuable!

Thanks for your view galumay...

 

[Boggo]

Triathlete, follow up from TLS thread.
Daily chart attached but it is not the consistent or 'rule' compliant pattern that I would like.
Basically the price has just touched the minimum W5 level and has attempted a bounce from there.

If we were to expect VOC to play out according to this then there is quite a bit more downside but I would be looking for other factors to influence opinions or decisions.

Daily chart...

 

[Triathlete]

Triathlete, follow up from TLS thread.
Daily chart attached but it is not the consistent or 'rule' compliant pattern that I would like.
Basically the price has just touched the minimum W5 level and has attempted a bounce from there.

If we were to expect VOC to play out according to this then there is quite a bit more downside but I would be looking for other factors to influence opinions or decisions.

Daily chart...
View attachment 70755

Thanks Boggo.....Always good to get another opinion....Lets see how it plays out..!

 

[JTLP]

Well called by chartists. Bit of a downer trading update released late this evening.

 

[mcgrath111]

Well called by chartists. Bit of a downer trading update released late this evening.

Indeedy.
Insider trading.
Insider trading.
Oh and did I mention?
Insider trading.

 

[skc]

Attitude A: How did hedge funds work it out? What was wrong with the broker's projections? Could I have worked it out? What did I miss? Should I change my style and use technical analysis?

Or

Attitude B:

Indeedy.
Insider trading.
Insider trading.
Oh and did I mention?
Insider trading.

Only one of these will help someone learn and master the market...

 

[JTLP]

Attitude A: How did hedge funds work it out? What was wrong with the broker's projections? Could I have worked it out? What did I miss? Should I change my style and use technical analysis?

Or

Attitude B:


Only one of these will help someone learn and master the market...

Assuming you're referring to attitude A?

Anyway glad I didn't double down on this one [emoji29]. I'm expecting to see sub $3s today.

 

[Klogg]

Downgrade is substantial and I'll be keen to listen to the conference call.

What I find interesting is $40m of revenue that's deferred ends up as $33m of EBITDA... Operating leverage is a double edged sword. (From the below two points)

"Following an accounting review of the negotiated contract terms on a number of large projects included in the 2HFY17 forecast, the revenue associated with these projects will be predominantly recognised in future periods rather than recognised as an upfront contribution in FY17 ~$40m"

"Impact of the accounting review as stated above ~$33m"


Similarly, $12m in revenue from Enterprise & Wholesale along with additional headcount impacts the EBITDA line to the tune of $10m.
I wish they'd split out the additional headcount, that way one can get a feel for the operating leverage at play.


Also, using these numbers and comparing to first half, EBITDA appears to be flat, but NPAT reduced ($92m 1H vs $70m 2H). Huge increase in D&A, likely due to NextGen and the large capex profile.


I really need to see deeper numbers (subscriber numbers, Enterprise revenues/margins) to prove or disprove a few of my previous ideas.

 

[craft]

Downgrade is substantial and I'll be keen to listen to the conference call.

What I find interesting is $40m of revenue that's deferred ends up as $33m of EBITDA... Operating leverage is a double edged sword. (From the below two points)

"Following an accounting review of the negotiated contract terms on a number of large projects included in the 2HFY17 forecast, the revenue associated with these projects will be predominantly recognised in future periods rather than recognised as an upfront contribution in FY17 ~$40m"

"Impact of the accounting review as stated above ~$33m"


Similarly, $12m in revenue from Enterprise & Wholesale along with additional headcount impacts the EBITDA line to the tune of $10m.
I wish they'd split out the additional headcount, that way one can get a feel for the operating leverage at play.


Also, using these numbers and comparing to first half, EBITDA appears to be flat, but NPAT reduced ($92m 1H vs $70m 2H). Huge increase in D&A, likely due to NextGen and the large capex profile.


I really need to see deeper numbers (subscriber numbers, Enterprise revenues/margins) to prove or disprove a few of my previous ideas.

Mainly looks like the infrastructure side of the merger is causing intergestion. Not a surprise really considering the departures. However the more departures I see the more I like it. Building more and more telecommunications infrastructure looks to be becoming a tragedy of the commons for the industry. The have some good niche infrastructure to leverage from the M2 combination but all the bob the builders from old Voc, Nextgen, Amcom etc need to disappear, Superloop is welcome to them. Share register needs to adjust accordingly.

Once the teething has passed the underlying M2 business should be able to leverage the new infrastructure appropriately.

Apart from the weather induced electricity volatility the M2 retail business seems to be doing o.k. Market share and churn rates both going in the right direction.

I still have my original core M2 holdings and would like to replace what got trimmed off on the way up because of portfolio risk limits, but every time I have tried so far there has been decided weakness indicating the time is not right. Perhaps this will be the opportunity.