VTG - Vita Group

[Gringotts Bank]

@greggles any thoughts on the fundamantals?

 

[greggles]

@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.

 

[Country Lad]

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.

 

[greggles]

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

 

[notting]

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)

 

[Mr Bear]

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.

 

[notting]

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!!

 

[Mr Bear]

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

 

[notting]

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!

 

[notting]

Having another ripping day.

 

[barney]

Having another ripping day.

Nice looking Chart!

 

[greggles]

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.

 

[notting]

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!!! -

 

[jonnycage]

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

 

[finicky]

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

 

[finicky]

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

 

[finicky]

A sickening blow
Held

 

[finicky]

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

 

[finicky]

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

Daily

 

[Dona Ferentes]

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.