Vocus shares to drop; market cautious on FY18 guidance
Vocus Group stock is likely to weaken at the open "as the share price was trading around the potential takeover, not fundamentals," Morgans analyst Nick Harris reckons.
Vocus Group stock is likely to weaken at the open "as the share price was trading around the potential takeover, not fundamentals," Morgans analyst Nick Harris reckons.
The telecommunications infrastructure company said on Monday that all discussions with its private equity suitors KKR and Affinity had ceased, with the bidders advising they are 'unable to support a transaction on terms acceptable' with board.
"We note that Vocus provided un-audited underlying 2017 financial year net profit after tax which was below the company's guidance range," Harris wrote in a research note to clients.
"One of the exit clauses to the takeover bid by both private equity parties was based on Vocus achieving its FY17 guidance, which has not occurred."
Vocus said an important factor in the board ending the sale process is the company's guidance for the 2017-18 financial year.
The company is forecasting revenue to grow to between $1.9 billion and $2 billion, while underlying earnings before interest, depreciation and amortisation is expected to tick up to between $370 million and $390 million.
Morgans is forecasting 2018 financial year revenue of $1.9 billion and EBITDA of $389 million.
"The board is confident that Vocus can 'deliver a return to sustainable organic growth' in 2018 financial year," Harris noted. "Given several material misses to its own guidance in 2017 financial year, we think the market may remain cautious on this."
In the medium term, Harris thinks there is upside around delivering on the strategies stated at the recent investor day "which aim to make the whole of Vocus more valuable than the sum-of-the-parts."