The Vocus Group Ltd (ASX: VOC) share price has fallen 26% in the last 12 months, having recovered from its 52-week lows of around $2.28. Now at $3.14, is the company still an opportunity?
Many shareholders dumped Vocus after it cut its dividend to conserve cash following some financial troubles last year. The company seemingly overreached in its acquisitions and may now have to sell assets to pay some debt. The data centre business is reportedly considering a sale process.
Importantly, the core business appears to be making progress following the installation of a new Chief Financial Officer at the end of 2016. Vocus has strengthened its internal controls, and the recent investor update revealed a 50% backlog in dealing with new orders, as well as personnel savings and wins of a considerable number of government contracts.
Vocus's share of the National Broadband Network (NBN) market continues to expand as well, rising from 7.3% to 7.8% at the end of the first quarter of 2018. The Australia-Singapore Cable (ASC) also continues to make progress and is expected to complete in the first quarter of 2019.
While the Vocus turnaround project is ongoing, and involves a number of tricky technological upgrades and implementation of a new sales team, the progress to date has been respectable and Vocus is expected to reach full potential in the 2020 financial year.
Competition in the telecom space is strong and TPG Telecom Ltd (ASX: TPM) and Telstra Corporation Ltd (ASX: TLS) won't take Vocus' expansion lying down. Still, with a significant opportunity to improve its services and with so much progress made already, today's price of 16x earnings doesn't look expensive for Vocus.
