Vianet Share Discussion Threads

[mida5] 22/3/2013 16:01

A disappointing drop today.

[tech] 05/3/2013 09:11

Picked up a few below mid price, could have a SCSW write up this week

[gorse] 04/3/2013 23:21

Paul, mechanical trader is someone I filtered long ago.

[masurenguy] 04/3/2013 22:21

re - 272 -"more than happy to discuss any of the fundamentals of the company which you
may wish to discuss."

PP - you're wasting your time casting pearls before swine. Such trolls are incapable of discussing fundamentals or providing any other form of intelligent insight either.

[tadders2] 04/3/2013 18:33

Well said Paul.

Question.

Do you have any idea how much having iDraught in 2000 American pubs is worth to VNET?

Cheers

[paulypilot] 04/3/2013 17:09

mechanical trader - I'm not interested in your snide personal attacks, which you have a history of I note.

But more than happy to discuss any of the fundamentals of the company which you may wish to discuss. I have nothing whatsoever to be ashamed of - I gave my analysis of VNET based on the publicly available facts, was caught out unavoidably by a profits warning that none of us knew was coming, and promptly issued my analysis of the profits warning (which incidentally I spent the whole of last weekend working on, so it could be issued on Monday morning).

I think the shares are great value, and was happy to buy more for the 5.8% dividend yield. Short term sentiment will soon change once contract wins are announced. For sound companies, short term issues provide good buying opportunities for long term investors.

I bought most of my VNET shares at 103p, so am only 6 underwater AFTER a profits warning, and have collected a divi as well. So if that's a disaster, then it's not much to be worried about at all, is it? This is why I chose VNET in the first place - the recurring revenues from Brulines pay for a whacking great divi yield, and even if the growth parts of the business do disappoint short term, it doesn't really matter.

Markets at the moment are full of people who want to get rich quick, and have the attention span of a fruit fly! Whereas the fundamentals of VNET suggest that we can lock away a safe dividend yield of 5.8% at today's price, and probably look forward to (say) 50% capital growth on top of that once the vending & USA expansion begin in earnest. For a serious, long-term investor, this is a nice low risk each-way bet. Downside protected by divi & annuity-like income from Brulines, whilst upside thrown in for free, which has been my analysis from the start, and remains a very valid investing argument.

Cheers, Paul.

[westcountryboy] 03/3/2013 22:17

I expect everyone knows - but I couldn't immediately see any reference to it above - that according to the TDW site, Cenkos's latest estimates are 10p (from 14p) for 2013 and 14.3p (from 17.5p) for 2014.

[jeffian] 03/3/2013 21:51

I don't know about "too many unknowns" but the jury is certainly out. They have a core business which is at best static and at worst declining and some exciting possibilities in US and in payment solutions, but they need to show that the new businesses and acquisitions will perform. So far, that has been the problem; they haven't.

[mechanical trader] 03/3/2013 21:35

Profit warnings come in 3s.

Not harsh on pauly at all just his
subsequent behaviour which wasnt required.

We all stand by our own decisions.

Anyone who cant do that shouldnt be
in this business.

No doubt it will move up 10% or more
tomorrow after the tip but I wouldnt
touch it with a barge pole.

Too many unknowns.

[d40eq6] 03/3/2013 20:43

Bit harsh on Pauly. I like his column on Stockopedia and think his analysis is very good. At the end of the day VNET is only floating just below the price it was at the start of 2013, even with the 'profit warning'. For me, all the hallmarks of a share that is undervalued.

[mechanical trader] 03/3/2013 12:11

Thats a shame.

Used to be a good tip source.

Probably like pauly going to have to
eat humble pie and protect their
inflated ego.

ps, by that I meant pauly.

Never ever seen some one run about
so quick online when the P/Warning came out.

Poor lad, all talk.

Just accept we all have 1 or 2 per year.

In your case it was unfortunate it came after just
48 hours of your tipping debut.

[aishah] 03/3/2013 11:25

A new buy in Techinvest. Shares yield over 6% and are on a modest p/e of 6.8 on 2014 forecast.

[paulypilot] 26/2/2013 08:53

Where's everyone gone, was it something I said?!!!

Good to see Director buying in size, 65,000 shares, announced this morning. Here is my take on it, for anyone interested:


Regards, Paul.

[paulypilot] 25/2/2013 14:55

Hi Jeffian,

Interesting points thanks.
From what you suggest, it sounds like the worst that could happen is that the breweries might have to change the way they fine tenants. But that doesn't alter the fact that they will still use Brulines to monitor compliance with the tie.

It's difficult to see any situation arising whereby the breweries would stop using Brulines to reconcile the number of pints dispensed with the amount of barrels supplied.

Also worth bearing in mind that Brulines is installed on long-term contracts, of around 5 years I believe, of which some large customers have renewed relatively recently.

Vianet also said that their installed base in the UK has fallen from 18,500 to 18,000, but they specifically said that no further erosion of that installed base is expected now.

With 15% now being higher margin iDraught too, the core business looks pretty stable to me. Longer term the USA growth could be pretty exciting. I understand they are doing a mixture of pilots, and full roll-outs in the USA now. It is likely to run at a loss initially, but should build into a very significant market over the next few years. Mgt are most excited about the potential from the USA from what I can gather.

Regards, Paul.

[jeffian] 25/2/2013 13:03

Paul,

Where have you been? The Government have been meddling in the structure of the pubs business since the ill-conceived Beer Orders in 1989! You are right that it is unlikely that the 'tie' itself will be outlawed - it has been tested in the European Courts on several occasions and approved - but there are current and active steps to undermine it, with 'Business' (Hah!) Secretary Vince Cable recently moving towards placing a statutory code of practice on the pubco's.



So far as Brulines is concerned, the regulatory threat stems from the way in which the system is operated. Pubco's start from the premise that the system is both foolproof and 100% correct. In the event that the Brulines stats do not tie up with purchase orders, they charge the tenant's rent account with an immediate 'fine' calculated on the amount of beer they believe has been bought out from another supplier. Some tenants argue that the system can, in fact, make mistakes and make the point that as it is outside the Weights & Measures regulations, there is nobody other than Brulines itself to check that it is properly calibrated. On the 'fine' aspect, I'm a bit out of touch now but I would be interested to see how the Tenancy Agreements cover this. I doubt it could be recovered as 'rent due' and I don't know whether the concept of a landlord both calculating and charging a tenant without recourse to challenge or appeal has yet been challenged and tested in Court.

I agree with you about the tie. It is two business people entering freely into an agreement (and a not uncommon one, which can also be found in petrol filling stations - when did you last buy Shell in a BP station? - and many franchise operations), but the politicians have got their teeth into the pubco's (and Brulines by association) so I repeat that regulatory risks remain.

[paulypilot] 25/2/2013 11:50

Hi Jeffian,

You mention legislative threats, but what are they specifically?

I've not seen anything credible to suggest that the brewery Tie system is under threat, and that's what mainly supports the Brulines product. Remember that pub tenants enter into those tenancies of their own free will, and on arms length terms. So it's difficult to see how the Govt can interfere in such arrangements.

Pub cos get a payback from the mark-up on drinks, in order to recoup the capital they deploy in buying & refitting their pubs. In any case, the pubcos have such strong lobbying power, can you really see the Govt interfering & ending up with a huge legal battle on their hands?

It's not the job of Govt to meddle in contractual business arrangements between arms length parties.

Regards, Paul.

[paulypilot] 25/2/2013 11:46

Hi,

We've just published an update note on Vianet at Equity Active.
I hope you find the note interesting, and I've taken into account the comments & reactions from shareholders here.

We're not paid by anyone to write these notes, so we can tell it like it is! (or as we see it anyway).

Let me know what you think:


Cheers, Paul.

[jeffian] 25/2/2013 09:50

Paul,

"the group has changed considerably in the last few years. They made a series of acquisitions, and have used the cashflow from the core Brulines business to finance initially loss-making activities such as the fuel monitoring & vending operations."

I remain a shareholder but, like others, have reservations following the profit warning. The point about the acquisitions is that they were borne of necessity rather than conviction. The core Brulines business can only go so far in the UK and is under threat here from legislative changes, so they needed to find new long-term profit centres before profits stagnate and fall back (as, indeed, the recent TS is indicating). Yes, the US has the potential to drive Brulines forward but it is early days yet and remains to be seen whether the initial trialling will turn into widespread adoption, but the jury's still out on the new businesses. Fuel Solutions has yet to establish stable profitability and Vending, which has exciting possibilities, has not achieved much yet. So, yes, they have a window of opportunity to convert from the largely static Brulines business into something else that grows, but it's not entirely clear when or if that will be achieved and they don't have for ever to find out. I'll give them the benefit of the doubt for now, but we need to see real progress this year and delivery of some of that 'potential'.

[paulypilot] 25/2/2013 08:10

Hi Liarspoker,

I'm not sure that is a logical way of looking at VNET, since the group has changed considerably in the last few years. They made a series of acquisitions, and have used the cashflow from the core Brulines business to finance initially loss-making activities such as the fuel monitoring & vending operations.

However, if you model the figures with them moving into profit (which will obviously happen at some point, otherwise they would just be shut down!) then the earnings picture becomes much more interesting.

So VNET is really a core, highly profitable business, with several smaller, loss-making, developing businesses attached. See it in its constituent parts, and look to what happens when growth emerges, and it all looks a lot more exciting.

Management just have to deliver on the growth, which so far they have not managed to do.

Brulines made a £5.5m operating profit (before group central costs) last year, for example, whilst fuel monitoring lost £1m, and vending lost £0.2m. The USA will also lose about £0.5m this year, and hence the full results are going to be depressed by these factors.

There are new contract wins in fuel starting in Mar & Apr 2013, so that could well eradicate losses & move it into profit for 2013/14. Same with vending, once they close their big contract that has been delayed, that should deliver a much better performance in 2013/14 as well.

You have to look forwards at how the results should improve, not look backwards, to get a handle on how these shares are probably at an attractive entry point right now.
However, it all depends on management actually delivering. I think they have over-promised and under-delivered so far, and will say so in my update note being issued later today by Equity Active, the company I helped recently set up to shake up smaller caps research & Investor Relations. We're independent, so we can say the things that other people are thinking but dare not publish!

Regards, Paul.

[liarspoker] 24/2/2013 22:43

I'm not so sure that this is a bargain even after the share price fall.

5 year average PBT = £3.64, which gives a PBT multiple of 7.4X 5 year average PBT, but OP before adjustments will come in at no less than £3.2m suggesting a much lower PBT.

Ok, so contracts are due to come in next year so let's say they do £4m PBT which would give a broad EPS of 12p giving a multiple of 8.16. The 5 year average P/E is 10 so the 2014 multiple is not much of a discount to the longer term average.

Given the increases in costs over the last few years ( increasing revenue, falling PTP ) this company is around fair value as I see it especially since there are no assets to fall back on.

If VNET manages to do 13.5p eps on a multiple of 11 then the company is starting to look cheap imo.

[masurenguy] 24/2/2013 14:14

You make some excellent points Paul and I concur with your view. I have retained my holding here although it's slightly under water at the moment. My only reservation relates to management credibility and the final results will be the first test to see whether they comply with the recent update or whether there is more bad news still to be revealed.

[hastings] 24/2/2013 13:27

Appreciate your thoughts and comments Paul.

[hastings] 24/2/2013 12:45

Hi Paul,
I don't hold here,but was tempted! some very good thoughts and in depth analysis of the co and prospects well put. In relation to the divi, I wonder what pre-tax figure Cenkos now has pencilled in,for both this year and next year in relation to the level of cover. I take on board, what you say in relation to the core business generating consistent profits in order to maintain the yield, but equally would a drop in in the full pre-tax alter the picture somewhat.