Today’s blog will most likely be our final with respect to Vita Group Limited (ASX: VTG). In a portfolio of 20-30 companies, we will make mistakes – and VTG is, in absolute terms, one of our larger ones. Importantly, despite this loss and others The Montgomery Fund has outperformed over the long term. We also maintain a continued focus on where and why we erred.
What a week it’s been for Vita Group (VTG), which operates over 100 Telstra stores. On 4 April, Fairfax published an article referring to a ‘leaked’ Telstra draft document that said it is considering taking back high performing stores from licensees. VTG’s share price promptly plummeted. After VTG rebutted the leak, its share price rebounded. So, who should we believe?
In this video we run through the series of events we’ve seen in Vita Group Limited over the past 6 months. Viewers should note that The Montgomery Fund and the Montgomery Private fund are both holders of Vita Group shares.
We understand many investors have been watching the recent share price action of Vita Group closely. Many have expressed dismay at the slump following ‘news’ that Telstra was renegotiating its terms with its licencees – something that Telstra does every quarter and ‘more than 50 times’ with VTG.
Vita Group Limited (ASX: VTG) is an established operator of retail telecommunications product resellers. It holds a Master Agreement with Telstra Corporation (ASX: TLS) to run 100 Telstra retail outlets. This is a key driver of its performance over the last half a decade from which it evolved as an operator earning circa $7m in underlying earnings to $18m in FY15.
FY18 earnings guidance is around -20% lower than previous consensus forecasts, at EBITDA of $36-43m. Earnings have been affected by the timing of the release of new devices, in particular the delayed availability of the iPhone X stock.
Australian consumers seem to respond well to the iPhone 6 as it allowed Vita Group to issue a positive profit warning. Morgans analysts are pleased, but they still maintain positive momentum will be largely carried by ongoing new shop additions.