Vocus starts to lose its appeal

Scott Shuttleworth from Montgomery Investment Management says they’ve sold their position in Vocus. Before the M2 merger, the Amcom/Vocus merger allowed it to offer “a Telstra-like service at a fraction of the price,” with incremental margins were up to 90%. “We only required a moderate increase in revenue and a large increase in earnings would be the result.” The price was ~$6, and “it was not a hard decision to buy the stock.” Post-M2 merger, the merged entity has focused on retail, which changes the drivers of the earnings. With the stock now at ~$9, they began to trim their position. “The future case for the consumer broadband market may not be so clear-cut... We’ve seen research which demonstrates the ability of wireless provider to potentially disintermediate NBN services in the future.” However, he does acknowledge this will "not be our last investment in the telecommunications sector.”


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