VTL - Vital Telecommunications (formerly Team Talk)

[financewiz]

I picked up some today, it's a buying opportunity at a reasonable discount to NTA.
They are a good team with a good business but felt that they were pinning too much of their hopes on this but you have to be in to win don't you. St Johns is only 8% of their revenue with doesn't impact them until 2025.
Losing this is not great but they can focus on other opportunities in the market. They are vulnerable to takeover at this price level which is not really a scenario I favour but we'll see

[Snoopy]

I picked up some today, it's a buying opportunity at a reasonable discount to NTA.
They are a good team with a good business but felt that they were pinning too much of their hopes on this but you have to be in to win don't you. St Johns is only 8% of their revenue with doesn't impact them until 2025.

Yes, I saw that "8% of operating revenue" figure in the CEO's AGM address.

'Operating Revenue' - 'Other Income' = $35.239m -$0.136m = $35.103m (AR2021 Note 7)

8% of that is 0.08 x $35.103m = $2.808m

In some ways I am surprised the annual revenue from St John is not higher. But I don't see all that much scope for reducing running costs in the future. This must be, from a Vital perspective, quite a significant historic capital expenditure, - with the ongoing operating costs contained to run on the smell of an oily rag.

The real problem with this underlying situation is that the segmented EBIT from the 'Wireless Network' was only $200k last year. Pull the St John revenue off that figure and this much trumpeted new digital radio network is now losing $3m per year. With overall EBIT for the whole company being $3m, that reduces overall company EBIT to zero. And annual interest bills of some $2m, which we know will increase are yet to be paid.

The size of the bank loan is $15m and growing and there is no income there to pay the interest in a rising interest rate market. It is hard to imagine a situation that is more dire than this.

Losing this is not great but they can focus on other opportunities in the market. They are vulnerable to takeover at this price level which is not really a scenario I favour but we'll see.

The last takeover offer from Spark was rejected when Grant Samuel suggested the company might be worth from $1.532 to $2.11 per share, subject to working through the business development plan. It now appears Spark was right as Vital management have failed to deliver. I understand the attraction of investing in a company when it falls into a hole financewiz. I use this same modus operandi myself. But if a company falls into a hole, the next question is, what is the spade they have to dig themselves out. With crumbling sales on their wired networks as well, I just don't see one.

SNOOPY

[flyinglizard]

numbers are not important now. where is SPARK or VODAFONE?

[Snoopy]

Well I have some good news. As a result of the declared dividend, that will be paid in FY2022, the 'capitalised dividend valuation' of this company has increased (was 28cps)!

Year	Dividends as Declared	Gross Dividends	Gross Dividend Total
FY2018	0c +0c	0c + 0c	0c
FY2019	0c + 0c	0c + 0c	0c
FY2020	3.5c + 0c	4.86c + 0c	4.86c
FY2021	2.5c + 0c	3.47c + 0c	3.47c
FY2022	2.0c +0c	2.78c + 0c	2.78c
Total			11.11c

Averaged over 5 years, the dividend works out at 11.11c/5 = 2.22c (gross dividend) per year.

I have considered a capitalised dividend rate of 5% as appropriate for Chorus. However, taking account of VTL being a much smaller beast with a concentrated two area geographical market for broadband, I feel a 6% capitalised dividend rate is more appropriate here. This assumption, combined with the five year average of earnings gives a 'fair value' for VTL shares as:

2.22c / 0.06 = 37cps

Dismal half year result announced today, a loss of $799k. NTA down from 59c to 56c,

Vital Chairman, Roger Sowry, said: “Notwithstanding that factors outside our control have contributed to the result, the first half performance is disappointing. The Board will be undertaking a detailed review of Vital’s operations and ways in which performance can be improved.” “The findings of the review will be communicated to shareholders within the current financial year,” said Mr Sowry

That doesn't sound like a ringing endorsement of the operational management of the company does it?

Debt is down to $13.649m, so cashflow at least positive. Full year loss forecast for FY2022 ending 30-06-2022. Operational savings of $1.3m still on course over FY2023. D-day with the banks January 2024 (which really means June 2023, because no-one leaves negotiations until the day the bank bell rings).

A recovery prospect, or is this a death spiral? Someone on the buy side prepared to take the risk at 30c......

SNOOPY

[winner69]

Need to get David Ware back

[percy]

Need to get David Ware back

Leave him in peace.
Wore himself out there.

[Snoopy]

Dismal half year result announced today, a loss of $799k. NTA down from 59c to 56c,

Vital Chairman, Roger Sowry, said: “Notwithstanding that factors outside our control have contributed to the result, the first half performance is disappointing. The Board will be undertaking a detailed review of Vital’s operations and ways in which performance can be improved.” “The findings of the review will be communicated to shareholders within the current financial year,” said Mr Sowry

That doesn't sound like a ringing endorsement of the operational management of the company does it?

Debt is down to $13.649m, so cashflow at least positive. Full year loss forecast for FY2022 ending 30-06-2022. Operational savings of $1.3m still on course over FY2023. D-day with the banks January 2024 (which really means June 2023, because no-one leaves negotiations until the day the bank bell rings).

A recovery prospect, or is this a death spiral? Someone on the buy side prepared to take the risk at 30c......

Wow, only the SHAZ crowd left playing with this one? $19 worth of share traded this morning. Offer price an all time low 25.5c now, as the prospect of no profit for this year sinks in and no path to profit is obvious after that? Someone said in times of uncertainty 'follow the yellow brick road'. Was that the Wizard of Oz, or Elton John? And what does this imply about following the red brick road? The baraginmeister in me says buy a few and see what happens, 'folllow the red brick road'. What song should I sing while doing so? It seemed to work out OK for Dorothy, although if I remember the film ending correctly it ended up being all a dream.

What we have here is a 21st century state of the art broadband network in downtown Wellington and Auckland. Remember those places? I think pre-Covid-19, office workers used to go there. What is at the end of the red brick road? Or am I dreaming?

SNOOPY

[percy]

https://www.youtube.com/watch?v=LQiOA7euaYA
https://www.youtube.com/watch?v=OFgayzZ5KTM

[Snoopy]

https://www.youtube.com/watch?v=LQiOA7euaYA
https://www.youtube.com/watch?v=OFgayzZ5KTM

Ah 'The road to nowhere' by Talking Heads - a good song for the situation. But I think the road for VTL is actually becoming clearer, so I have found a even better song to hum along to as the share price 'slips away' - a real kiwi classic

https://www.youtube.com/watch?v=d08Cnyzi_iw

The high bid is up to 26.5c, but the actual share price has resumed it's downward trajectory with a last sale of 28c and shares on offer for 27.5c. Actually a $3 parcel traded at that latter price as I write this. Someone has sacrificed half a latte to buy into this Stowry!

SNOOPY

[stoploss]

Ah 'The road to nowhere' by Talking Heads - a good song for the situation. But I think the road for VTL is actually becoming clearer, so I have found a even better song to hum along to as the share price 'slips away' - a real kiwi classic

https://www.youtube.com/watch?v=d08Cnyzi_iw

The high bid is up to 26.5c, but the actual share price has resumed it's downward trajectory with a last sale of 28c and shares on offer for 27.5c. Actually $3 parcel traded at that latter price as I write this. Someone has sacrificed half a latte to buy into this Storey!

SNOOPY

Snoops check out this version ....and it was only the Sound check !!
https://www.youtube.com/watch?v=BIsZXx2AoL8