Australia's largest stock trading and investment forum Australia's #1 stock forum

VOC

Click for more information

0.00%

$5.49 vocus group limited

Happy to see someone understands the cash flow implications of...

First 20 Last

Share
Profile

Follow
DeltaHedge

198 Posts.

14

27/02/18

01:34

Post #: 31363669
Share

Originally posted by JoeGambler ↑

Its USD121m which is over A153m, it's a big number and likely more than 1/3 of the sale price of NZ. I assume it will fall due on the completion of the project which is slated to be Q1FY19. I presume this is why the June 30 goal for the sale of NZ is required.

Just on this years capex, only about 80m of the 180-190m non ASC capex guidance has been expensed. Which, according to the presentation, leaves A100-110m left for the second half. This is in addition to the further USD19m (A24m+) ASC capex. That's potentially A130m+ capex in H2FY18 alone.

Cash from operations was only A86m and another A22m of debt was added to cover the first half spend, which was only about A110m total. Yes, they are guiding no change in debt, but clearly there is going to have to be big increase in cash flow to cover the even bigger required capex bill this half. I don't recall much in the way of cash flow guidance for the second half to pay for all this, do you? In fact, they downgraded profit expectations for the second half, albeit some of that to do with non-cash depreciation.
If they match the first half cash from operations that's a A50m+ shortfall and would put them right to the top of the facility limit and most likely bust the EBITDA covenant at the lower end of EBITDA guidance.

So, the NZ sale will have to cover the second half capex somewhat in my opinion, as well as the final ASC payment. That is potentially over A200m being diverted from the sale of Vocus NZ which won't be going to reduce debt. If 400m is achieved, the debt might only be reduced to A850m, yet EBITDA will also dive by 50m+ with the NZ business no longer contributing.

It's a bit of a dicey looking situation as debt will still be quite high if the ASC doesn't really take off to cover for the lose of the NZ business, or other remaining parts of the business for that matter. The debt/EBITDA ratio would still be high twos. The thing I don't really know is what FY19 capex will look like. If that is substantially reduced than it could relieve some pressure quickly. I assume there are some broker reports with assumptions. I probably should know this. Maybe Bug1 has an idea about that and whether I am on the right track here with the numbers I am trying to interpret.

Bottom line is it is a very stretched balance sheet to get this cable over the line.

Expand

Happy to see someone understands the cash flow implications of the companies capex requirements. This is the silent killer management are trying to keep hidden.

What baffles me is this:

Vocus are selling a profitable revenue stream (NZ business) for a project that has yet to produce EBITDA. The potential cash flow from the ASC is not guaranteed yet. I find this very confusing from an investment point of view. They are selling a good business for unknown beneficial project.

IMO they shouldn't risk selling NZ, they should just do a $150m cap raise and get on with business. Put in a solid CEO for Aus Vocus and one for NZ (unsure who runs it at the moment). Have both businesses run separately for better focus by each CEO.

If someone could link me or reference me the estimated ASC earnings/editda I'll do a project comparison for ASC v NZ.

Cheers.

Last edited by DeltaHedge: 27/02/18

VOC Price at posting: $2.41 Sentiment: Hold Disclosure: Not Held
7 Upvote

0 Great analysis

Reply

Top Stories

RNU

Renascor wins a funding boost given it wants to produce a critical mineral – but $5M award pales in comparison to some

AUG

Augustus sees imperial share rise on high-grade Cu and gold results at Ti-Tree

I88

Infini soars 50% as company reveals it could’ve just made uranium history – redefining what it means to be “high grade”

TLX

Telix jumps 11.6% as US government indicates proposed medicare changes won't affect prostate cancer drug

TX3

Canadian fieldwork yields multiple pegmatites for Trinex

There are more pages in this discussion • 46 more messages in this thread...

First 20 Last

Add VOC (ASX) to my watchlist