1. If Vocus thinks net debt will be $1.03-1.06bn at the end of FY18 and EBITDA to be $370-390m, how do they get a ratio of 2.65x? They are inconsistently picking the low level of debt and high level of EBITDA. If you pick the mid-point for both, the leverage ratio is 2.75x. If EBITDA comes in at the low point, the leverage ratio is 2.82x.
The covenant will be triggered under normal circumstances if EBITDA is $353m ($1060 / 353 = 3x). So their margin for error is $17m.
2. It looks like Vocus will NOT be paying a dividend in FY18 or FY19. If their debt level is not falling by then end of FY18, and the bulk of their ASC capex falls in FY19, it is likely they will be raising capital.
3. NBN market share data is misleading as I have explained in previous posts. Their broadband subscriber growth is 4%. This is lower than TPG and the industry. They are losing BROADBAND market share.
4. The deferred SAC is the key problem. Dodo and iPrimus contracts are for 24 months. That means each deferred SAC amount is divided by 4 for each half-year e.g. $33.8 divided by 4 is ($8.4m) and they deferred another $46.8 which divided by 4 equals ($11.7m). So in total that is ($20.1m) which is close to their reported expensed figure in 1H17 as not all of the new deferred amount falls on day 1. If Vocus stops handing out freebies, the amount expensed in FY18 will be ~$62m. This will hit the PnL. Vocus states their "current deferred SAC" is $56.3m.
And that is if they STOP handing out freebies. This is significant because their margin for error is ONLY $17m.
5. Geoff Horth's remuneration increases 3x when on a PER SHARE basis everything went backwards.
6. It's all about +XXX growth but hey, who cares about the shareholder impact, right?
And this is just the beginning. Btw, I'm not obsessed about criticising VOC. I am merely a bargain hunter. I could buy VOC...but I just don't think it is a buy until it falls to $1.00-1.30.
