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Ann: VTG FY20 AGM Presentation and Trading Update, page-15

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InstrumentOfGold

40 Posts.

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03/02/21

15:46

Post #: 50679055
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Originally posted by kcityshuffle: ↑

IMO VTG's share price is significantly undervalued vs intrinsic value.

Based on my analysis (caveating that I own shares in VTG and the below is based on my own calculations so please complete your own analysis prior to making any investment decisions):

VTG's top-line revenue increased 3% in FY20 and has grown at an average of circa ¬8% p.a. in the past 5 years. For FY20, this includes strong revenue growth of 47% in the SHAW division, and 2% overall growth in ICT despite the impacts of COVID-19 (including a 5% increase in retail ICT).
Free cash flow to equity was approximately $12.8m in FY20 (including approx. $41.2m in operating cash flow, $21m capex, and $7.4m net debt repayments).
Applying the FCFE Gordon Growth valuation model shows an intrinsic value range of $1.60/share to $2.74/share, assuming long term growth rates of 5% to 7% to FCFE.
This assumes a 10% required return on equity.
This implies a range of potential upside to intrinsic value of approx. ¬52% to 158% based on the current market price of $1.06/share. This range could be interpreted as indicating a margin of safety with asymmetric upside potential.
VTG is trading at a P/E of just 7.8X, implying an earnings yield of 12.8%
Cash is king; VTG's operating cash flow has been consistently growing over the past 3 years and is trending towards its 2017 highs.
Current dividend yield of 3.7% (note dividend yield has been historically much higher).

In addition, given the current inflection point with growth stocks having outperformed value since the GFC, record low interest rates, recessionary signals and frothy stock market valuations (e.g. the S&P 500 - trading at a CAPE ratio of 35X and Buffett Indicator of 218%), IMO value stocks are primed to mean revert/outperform.

https://www.********.au/2020/09/21/macquarie-says-asx-value-shares-will-outperform-growth-stocks-from-here/.
https://www.livewiremarkets.com/wires/value-investors-hold-on-december-dip-just-a-blip-says-maple-brown-abbott

VTG looking like a great long term buy IMO.

IMO DYOR.

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Yeah mate, it is undervalued. However everyone knows that it is still dependent on Telstra. If Telstra decide to take more money off VTG they will. So the price will not reach the upper level of your price range until SHAW shows positive returns.
VTG Price at posting: $1.06 Sentiment: Buy Disclosure: Held
1 Upvote

0 Great analysis

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Ann: VTG FY20 AGM Presentation and Trading Update, page-15

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