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Emerging Companies: Vocus Communications Ltd (ASX: VOC)

Published 06-SEP-2013 00:00 A.M.


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Overview: Vocus Communications ("Vocus", ‘the Company") supplies telecommunications and data centre services to Internet Service Providers (ISPs) in Australia and New Zealand. The Company owns domestic fibre and data centre infrastructure whilst sub leasing international transmission capacity to Singapore and the US. We initiated coverage in April with a ‘buy’ recommendation at $2.10/sh.

Catalysts: Customer base expansion for the past 16 consecutive quarters has driven average compound revenue and EBITDA growth of 50 percent pa for the last three years. Concurrent reduction in capital spending and improved capacity utilisation is expected to

Hurdles: Amid recent capacity investments the Company’s balance sheet is fully geared (net debt 3x EBITDA). The rollout of the National Broadband Network (NBN) could adversely impact the competitive landscape.

Investment View: Delivery of the NBN is expected to reduce competitive barriers for ISP’s, increasing market opportunities for Vocus. Independent of the NBN’s final architecture, data demand should continue booming. With significant capacity at hand, we expect Vocus’s strategic wholesale investments to yield increasing returns amid these drivers. Impressed with current earnings momentum, we maintain our ‘buy’ recommendation and upgrade our 12-month target price to $3.40/sh.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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