Following fundies can be a place to get a perspective on a stock, and to alert you to those you may have overlooked in screening. Ron Shamgar who heads Australian equities at Tamin is one of my follows and this week they released piece on Vonex. My first reaction was, hasn’t that whole market been or being replaced by Teams?

Ron thinks it’s cheap, but is there a reason more than Teams, or has the market got this one mispriced? 

The company is focused on the SME market for mobile, internet, traditional fixed lines, and hosted PBX and VoIP services, and more recently on retail customers with the upcoming acquisition of MNF direct business.

Ron also thinks Vonex is serving an unmet need for SME’s for reliable, affordable, flexible, scalable and friendly services. Not going to disagree there are some truly poor operators in the market and move up the quality chain does come with a commensurate fee increase. These are largely commodity services, however, they are services we now rely on to conduct our businesses. Without follow up service, these SME’s without inhouse tech skills are stuck if there is an issue. 

While I am generally not a fan of roll ups, Vonex has been making acquisitions that provide scale as well as geographic reach and on the surface they all seem logical. They indicate cost savings, it will be interesting to see if 1+1 = 1 as happens all too often or the synergies can be realised.

The reference to Qantas rewards partnership puzzles me. I don’t understand this attraction, especially in SME land. Most SME’s are not regular travellers so this looks to me to be marketeering in fabrication of a point of differentiation.  

Couple of elements financials that are attractive is the fact they are profitable, with strength in their ARR this looks set to continue with high levels of growth in this metric. 

Ron finishes that ABB, have recently completed a $110m placement to fund an M&A strategy, with Vonex potentially on the target list. Now that would be a prediction and a half.

Interesting business that appears to be doing the right things. This is an extremely competitive and highly price sensitive market, with evolving technologies that could wipe away parts of the revenue stream (such as Teams vs hosted PBX) I will be watching from the sidelines and kicking myself if Ron is right about ABB. 

https://www.tamim.com.au/tamim-stock-stories/is-this-the-telco-you-need-in-your-portfolio