The Vocus Group (ASX:VOC) share price has been on a tear, soaring 40 per cent higher in the past 6 weeks, despite recently reporting lower full year profits.
Writing in its August 2018 monthly update, the top performing Yarra Emerging Leaders Fund said although FY18 profits were ahead of expectations, Vocus guided to FY19 EBITDA of $350 – 370 million, which was 5 per cent below forecasts at the midpoint.
Improved cash conversion alleviated concerns in the market that Vocus would need to raise capital to avoid breaching its debt covenants.
The fund remains positive towards Vocus shares premised on the combination of new management, improving fundamentals and quality of the asset base.
“The new management team is focused on integrating and simplifying its various acquired businesses, unifying its product offering and increasing customer product penetration,” the fund said.
The Yarra Emerging Leaders Fund said it remained confident in the longer-term revenue and margin opportunities, and believes that at 16 times forward earnings, the Vocus share price doesn’t adequately reflect its future growth prospects.
Group Managing Director and CEO Kevin Russell recently said Vocus is targeting to double revenue from its core Australian and New Zealand infrastructure focused businesses over the next five years.