What: Shares in Vocus Communications Limited (ASX: VOC) have kicked the week off on a negative note, trading as much as 9.3% lower before settling at $5.17 – down 33c or 6% for the day.
The fall came after the company announced on Friday (after the market's close) that it had renewed its contract with Vodafone New Zealand – its largest IP Transit customer. The contract was renewed at a fixed price in line with the market and the estimated difference on the contract between FY14 and FY15 is likely to be a reduction of $4.5 million in EBITDA.
So What: Although the company announced that it still expects strong EBITDA growth for FY15, the news seems to have dampened investor sentiment after the stock's strong rally in recent weeks. Prior to today, the stock had climbed in excess of 15% since the beginning of the month, bolstered by the company's acquisition of New Zealand's 'FX Networks'.
Now What: While shareholders would have loved to have seen the stock continue to reach for new heights, today's drop presents other investors with an opportunity to pick up shares at a much cheaper price than on Friday.
Vocus is a compelling alternative to other telcos like Telstra Corporation Ltd (ASX: TLS) and iiNet Limited (ASX: IIN), and while it is still trading on a projected P/E ratio of 33.8, significant growth is anticipated over the coming years so it doesn't seem like an unreasonable price to pay!
Another ASX Growth prospect you NEED to know about
As attractive as Vocus remains, it is lacking one thing that Aussie investors love… Solid dividends. Currently it is yielding just 0.4% based on forecasts for 2014.
