Vanco Share Discussion Threads

[finess] 15/1/2008 13:48

S o S

That Schwartz chap has a good pepper company, I use him alot.

An "up" on a big down day is lifting my spirits a little. ;-)

[02bursar] 15/1/2008 12:40

rk23

Very unlikely - see post 522 and later.

AT is on record as saying that he brushed aside approaches several years ago and given the levels the share price has reached in the recent past [>£5] and the future prospects of the business, is unlikely to entertain any in the foreseeable future.

Q4 is historically the busiest and half way through the final month. More likely is anticipation of a confirmation of the MAC rate or another contract announcement.

[rk23] 15/1/2008 12:06

Im going to put my neck on the line and say that a bid may be imminient for vanco, based on the fact the share price is behaving rather strange around that £2 mark, could be wrong, but hope not

[02bursar] 15/1/2008 11:05

SoundfSilence

I'm a private investor and hold a few VAN shares. Given the level of the contracted order book and the consistent MAC levels associated with it, I have no reason to believe the revenue target won't be achieved. Margins have also been historically consistent though the big deal announced early last year may knock it slightly; the actons taken to cease chasing contracts at a discount [see below] could mitigate that. Year end debt level will inevitably be a key indicator.

Given the quality of the contracted order book,the company's track record on execution and it's customer retention rate, I have no reason to believe that the banks would be uncomfortable with their positions.

Longer term prospects for the business look very good IMO and for the same reason, especially given their stated intention not to sacrifice margin for short term cash flow fixes and I will be looking for declining debt ratios over the next few years. In that time scale I'll also be looking out for one or two big deals which the company said it would be targetting if memory serves.

[mbthedude] 15/1/2008 10:52

Still need to close above £2 for the confirmed breakout that failed near end Oct 07.

[soundfsilence] 15/1/2008 09:41

02Bursar:

Thanks for sharing your research, you have been spot on so far (IMO), this just shows how much of a bargain vanco is at these prices.

It is amazing how far they dropped in 2007, I even wanted to get in at £3. An investment here now is low risk, with potential high reward (IMO)

Where do you see Vanco by end of 2008? (If you don't mind me asking)

[theband] 15/1/2008 09:40

AT just shredded page 16

[02bursar] 15/1/2008 09:28

Quote from above report:
"Is Vanco heading for stormy waters? We can't be sure. The shares have now become so cheap that it may even become the target of a bid, a fate that befell two of its rivals: Infonet and Equant (swallowed up by BT and France Telecom respectively)."

Most unlikely. AT owns 46%. Other directors own about 4%.

AT's intentions not to sell in the forseeable future are here - page 16.

[johnroger] 14/1/2008 15:55

Buy Vanco at 171.5p

argues Rob Cullum, editor of TrendWatch

In the spring of last year, we were seduced by the attractions of international telecoms outfit Vanco (VAN). Vanco doesn't do hardware, not at any rate the kind of hardware required by the big telcos such as Vodafone. Instead, it shops around all over the world, purchasing capacity from the local carrier of choice, with the object of packaging and offering its clients "fully-managed network solutions".

In a business environment that is truly global (we said last spring), no corporation, however large, (British Airways, say) can afford to own the telecoms assets upon which they are critically dependent. The solution is a long-term contract with a specialist such as Vanco. Vanco's job is to get the best prices, and to design a system which uses technology most appropriate to the particular needs of its customers, thus ensuring that service capability is maximized –but at optimum cost. And Vanco could point to the fact that blue chips such as British Airways, Siemens, Ford Motor Company, Avis Europe and Pilkington had entrusted this vital part of their enterprise to it.

The company has key relationships too with IT integrators and outsourcers, including Computer Science Systems and IBM. And Vanco can and does provide services to the very carriers upon which it depends –Bell Canada, AOL and Qwest to name but three. The key here is Vanco's unique portal, enabling it to access the entire telecommunications network of the US. Moreover, Vanco can and does support the international requirements of a number of their regional clients.

It also had a super earnings record. At that time of our previous recommendation, three brokers analysed Vanco; only one of them, WestLB Equity Markets, said that the shares were a buy. Its forecast for the year to January 2007 was 18.3p per share. The outcome was just 16.3p. So the earnings target was missed by some way; and the shares, which stood at 475p when we wrote (and which we hoped would regain the 600p at which they had been trading a short time before) headed rapidly in the other direction. It was only the TrendWatch stop-loss mechanism which stopped us from catching a truly dreadful cold.

To be fair, we had noted that it was clear that something was going on. The company stoutly averred that there had been no discernable change in the competitive environment, but the implication (although Vanco did not say so) was that its increasing size needed ever larger transactions to feed it, and that these both required heavy up-front expenditure and took longer than smaller deals to complete –and to produce revenue.



The headline cause of the subsequent halving of the share price was delays to three contract renewals, resulting in sharply increased cash outflow, despite the rapidly growing turnover and earnings. Against this background Vanco was chasing customers for upfront payments at period ends, typically at a discount, which in turn impaired margins.

By September last, the company admitted that a review of its procedures had concluded that it had focused on the achievement of short-term cash targets at the expense of long-term margins, and that ending this practice would have a one-off detrimental impact to free cash flow in the current financial year of approximately £20m; and that year-end net debt would now more closely reflect the underlying net debt during the year with net debt as at 31 January 2008 expected to be around £45m.

Vanco now has a new finance director, whose unusually high profile underlines the areas of weakness that caused investor concern –notably the fear that the company will need to come to the market for more cash. Vanco denies that it will need to do this, pointing out that, notwithstanding the foregoing, it's trading well within of its banking covenants. As the most recent report indicates, the winning of contracts, which has never been a problem, continues apace. The company uses this fact as a peg to hang the assertion that, with an increasing proportion of its turnover being contracted (£421m as at October 2007) this will tend to make the erratic cash flows associated with the winning of new contracts of less overall importance in future.

The brokers' consensus is that earnings per share this year will be 24p, climbing to 32p by January 2009. That's a splendid growth rate. This gives an earnings multiple of only 8 in the short term and less than 6 next year. So the shares look a real bargain.

But wait a bit. We've noted the problem of high borrowings and white-knuckle cash flows, this at a time when banks may be getting more sensitive to their exposure. To this, you must add the fact that, although the company's policy towards treatment of up-front expenditure (and thence the definition of 'earnings') is perfectly acceptable accounting practice, if there were to be either a voluntary or enforced more conservative accounting change, the stated earnings figures could face sharp downward revision, damaging the investment case.

So, a situation not without risk. Persistent weakness in a share price (especially when coupled to high levels of debt) is a much more sensitive pointer to risk than earnings forecasts. But, just as we ignore the latter if we don't like the prospects ourselves, there are (rarer) cases where we ignore the hoisting of storm cones too (only one of the five brokers, Charles Stanley, says 'buy').



Is Vanco heading for stormy waters? We can't be sure. The shares have now become so cheap that it may even become the target of a bid, a fate that befell two of its rivals: Infonet and Equant (swallowed up by BT and France Telecom respectively).

We see the risks, but we see too that the achievements still continue solid. Earnings are forecast to grow at a fast rate, it's still picking up major contracts and it describes market conditions as 'buoyant' (with no ill effects from the credit squeeze).

If you're a widow or an orphan, we wouldn't commend this share to you. If not, then our assessment is that the potential reward outweighs the risk –but do set a 20% stop-loss, just in case. BUY.

Key Data

EPIC: VAN
Spread: 170.75p – 172.25p (0.9%)
Market Cap: £106.6m

[masurenguy] 14/1/2008 14:30

He is very well respected. However. like everyone else, he makes some good calls and some bad ones too !

[soundfsilence] 14/1/2008 14:27

Does anyone know when the next set of results will be published? With all these new contracts won, lets hope we do break £2.

Masureguy:

Has David Schwartz got a good reputation with his previous analysis?

[masurenguy] 14/1/2008 14:17

A 6% rise this morning on quite a low volume !

[02bursar] 09/1/2008 13:26

VAN has signed a 3 year contract with Agility, a global multi billion Au$ logistics brand based in Australia.

[masurenguy] 06/1/2008 11:02

FT REPORT - WEEKEND MONEY: I don't plan to follow the random path
By David Schwartz, Financial Times
Published: Jan 05, 2008

I love stock market trivia that helps me to turn a profit. A good example is the high likelihood of a loss from January 5-13. Since 1990, the FTSE 100 rose just once during this period versus a whopping 17 declines. The single exception to the rule occurred in 1997 when the Dow Jones kicked off the year by setting several all-time highs. But even during this euphoric time, the FTSE 100 remained in the red until the final day of the period when a fresh Dow record finally triggered a rally to wash away the red ink.

Many Random Walk fans do not trust repetitive patterns such as this one. Their mantra is to dismiss such trends as random occurrences that are likely to end as quickly as they began. Who knows? Random Walkers might be right. There are no certainties when it comes to investing. My own view is that a substantive issue drives this trend - perhaps worries about the upcoming earnings season. Whatever the cause, 17 dips out of 18 tries does not look or feel like a random event to me. For this reason, I plan to put my money where my mouth is with a Footsie down bet.

Looking further ahead, the trend for the rest of the month is likely to be influenced by those upcoming earnings announcements. I shall probably remain on the sidelines until the underlying trend tips its hand. The only exception might be a trade or two within a small group of shares that I know very well and feel comfortable with. Some traders are happy to take short-term punts with shares they are not especially familiar with. But I believe that scattergun approach is dangerous during uncertain times. I prefer to trade shares that I have lived with and know their fundamentals, normal daily trading patterns, investor bulletin board gossip and what chartists are thinking. It gives me confidence to quickly open or close positions during uncertain times like now.

A good example is Vanco, a designer and installer of telephone networks. I have traded this share several times since first writing about it a few months ago. I am comfortable with Vanco for several reasons. Prices fell massively in the past 18 months. The shares are now in a base-building phase. The company is optimistic about its future growth prospects. From my vantage point, downside risk for this share is now lower than it has been for several years. Another plus for short-term traders like me is that Vanco shares are tightly held. A limited number are available to the public. This causes price fluctuations to be exaggerated. As the graph shows, the last rally ran out of steam about two months ago near 200p. Prices are again approaching this level. If shares break out above 200p, I shall increase my holdings by a large margin to catch a healthy continuation rally. Conversely, a failure to penetrate 200 is a clear signal to sell because the shares remain trapped in a trading range of roughly 150p to 190p. Either way, Vanco is a comfortable share to trade during uncertain times.

[mbthedude] 03/1/2008 13:02

I know we have risen for a few days, but the large drop on pitiful volume today is really overdone.

[02bursar] 20/12/2007 19:16

It's a world class player with 19 years experience behind it, competing in a massive global market evidenced by the deals it does partnering global enterprises and ABC's. It's consistently up there in Gartner's Majic Quadrant - see my post 509.

[youngferret21] 20/12/2007 14:13

Excellent news here we go north

[bigjohn75] 20/12/2007 09:45

Just bought another barrowful of these & nothing showed on the bid or offer.

[oohrogerpalmer] 19/12/2007 17:15

10% jump in the last hour -
whats brought that on ???

[mbthedude] 13/12/2007 12:05

Odd, 2 huge trades gone through at 10.51 200K and 150K both at 158, you would assume they are buys at that price yet the share price hasn't even blinked??

[02bursar] 12/12/2007 21:04

On that last point of my previous post, I'm interested in independent industry analyst views of the positioning of players in the market and Gartners Majic Quadrant - Europe and Global - makes interesting reading - pages 31/32 Vanco presentation Sep 07.



On financing needs, page 16 of the same presentation confirms that these are adequate for the foreseeable future and, with the recent director buys, also lays to rest the suggestion that the company would be taken private.

[02bursar] 11/12/2007 21:52

How long have you been following this stock? The main issue was its revenue recognition policy which was thoroughly cleared by its auditors but that didn't stop the shorters having a field day pushing rumours of dodgy accounting practice amongst other things. Yes there had been cashflow implications but they didn't justify the valuation of 125p from the previous high > 400p imo and mud sticks.

"No smoke without fire." Fear and rumours rule markets imo. My continued holding of Vanco is based on my preference for verifiable information about the conduct of its business strategy in its growing global market:

Read towards the end of this article , commenting on end to end network connectivity for specific industries in remote locations:



Do you think the work done by Vanco delivering a record breaking as-live video message from the arctic ocean was lost on the telecoms market?



or does it enhance its reputation for global reach and ability to execute in such locations:



http://www.flagtelecom.com/index.cfm?channel=4328&NewsID=27454

[ciscogaz] 11/12/2007 19:51

02Bursar can you explain the endless slides in prices. No smoke without fire.

youngferret21 how do you know? I work in the sector and it is comon knowledge contracts are much harder to renew these days and Vanco has several times confirmed this.

[youngferret21] 11/12/2007 13:54

too many de-rampers on the boards these days, Vanco are in a very good position and i look forward to positive news very soon.

[02bursar] 11/12/2007 13:43

I am a private investor and hold Vanco. I gave my opinion based on the most recent information released to the public; information which I have no reason to doubt or challenge at this moment in time.