Does Vita Group belong on your watch list?

Vita Group (ASX: VTG) announced yesterday a strengthening of its alignment with key strategic partner Telstra (ASX: TLS). The partnership with Telstra began 18 years ago and will last another five, as well as the potential for extensions contingent on certain benchmarks being met.

Vita Group’s revenues derived from Telstra will be reflective of driving Chief Executive Officer David Thodey’s oft-repeated number one priority of customer advocacy. Additionally, implementing Telstra’s strategic priorities will result in a pre-arranged sharing of revenues.

Vita Group is an Australian electronics and telecommunications retailer, comprising six brands: Fone Zone, One Zero, Next Byte (Apple’s (NASDAQ: AAPL) premium reseller), iConcierge (Apple’s repair agent), Vita Networks and Sprout Accessories, along with selected Telstra Shops and Telstra Business Centres.

There were three new announcements as follows:

1. Vita selling additional Telstra services

StayConnected and StayConnected Plus are Telstra’s new device swap, replacement and restoration services, which allow customers to swap or replace their device for any reason up to twice per year. From January 1, 2014, Vita Group will sell these through its telecommunications distribution channels. A more extensive product suite should hopefully result in increased revenues and a profit uplift.

2.  Vita to increase the number of Telstra-branded retail stores, including acquiring stores currently owned by Telstra

Currently Vita Group has 85 Telstra-branded retail stores. This will increase along with the proposed acquisition of stores currently owned by Telstra. Capital expenditure is expected to be between $13 to $17 million and incurred in late FY 2014. More store roll outs could potentially assure Vita Group of additional growth.

3. Confirmation of Vita’s master-license tenure to August 2018

The new arrangements also confirm Vita Group’s master-license tenure to August 2018, thereby providing additional assurance to investors.

Foolish takeaway

As a small-cap whose fortunes are intrinsically linked to those of the behemoths Telstra and Apple, I have no hesitation in recommending this investment.

Vita Group receives negligible broker or press coverage, which presents an opportunity. Gaining an understanding of the stock may enable Mr Market to be outflanked, as a result of the dearth of information and potential mispricing.

Some of my best investments have involved actually walking into a store or business and observing activity levels and staff attentiveness. Should you still feel reservations about Vita Group, I would encourage you to be a mystery shopper and in the meantime add the company to your watch list.

Get our top dividend stock idea FREE!

Discover The Motley Fool's favorite income idea for 2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2014."

Motley Fool contributor Mark Woodruff owns shares in Vita Group.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.