VOC came to my attention in late Nov 2016 when their price fell sharply based on a update to outlook. Basically they reported that a couple of areas of the merged operation were contributing less to EBITDA than expected. The price drop seemed to be out of proportion to the news - a situation I am always looking for. On the other hand I dont like the sector, Telcos face troubled times and reduced margins going forward and VOC is a merged entity of some parts that I really dont like from my own professional dealings with them - MTU being the main concern.
At first I was not in favour of taking a position, as I outlined on other forums,
"The margin on NBN is hard to believe, knowing what the fixed wholesale costs are! I guess it shows just how hard they oversell the product, contention ratios must be shocking to achieve that.
I am probably going to strongly regret not taking a position at current prices, but I cant get past my concerns with profitibility in the sector and the very poor business management of some of the businesses they have accumulated.
In the end I would rather stick with my strategy and conviction and miss some opportunities, and I think this whole sector falls into that category for me!"
As the price kept falling and I started to have a more indepth look at VOC, my opinion started to swing as you can see,
"Thanks for your thoughts Klogg, I deleted the post because the more I tried to crunch the combination of last years reported results and the figures from the update, the less confidence I had in them being in any way meaningful!
Now I am stepping back and taking a really big picture view and it just seems a lot would have to go horribly wrong for the underlying value of this company to be truly represented by a price sub $4.50.
So in summary I am swing back to a view of taking a position at the current price!"
and,
"I pulled the pin this morning, after going thru a lot of internal discussions overnight along the lines of you guys (McLovin & Klogg), I have some other concerns from an operational and management point of view, M2 is the WORST company to deal with, they almost make Telstra look competent, and as discussed previously the NBN margins are pure creative accounting - in the sense that they are calculated by specifically not delivering the service paid for - and the shadow of the ACCC hangs over that problem for all telcos in our market.
In the end I just couldn't make a compelling argument for VOC remaining at a price of low $4 for long, so I took a position even though its not a sector I had any great interest in being invested in.
Its interesting the sort of reactions to the slightest bad news in the current markets, not sure if its a function of the volatility, or the general world uncertainty, but we have seen it a bit recently. The reaction to the update from SDI recently was similar - I think Mr Market is very nervous and flighty at the moment, this does create some interesting opportunities like VOC this week!"
I certainly didnt pick the bottom, it has been down around $3.80 since I picked them up, but I never fret about that once I have made my decision. If they were good value when I bought them I dont mind missing out on a bit of extra value!
