Business SummaryVocus Group Limited (VOC, formerly Vocus Communications Limited) is aleading telecommunications provider of Internet, Fibre, Data Centres andUnified Communications across Australia and New Zealand. It provides highperformance, high availability, and highly scalable communications solutions,which allow enterprises and service providers to quickly and easily deployservices for their own use and for their own customer base.

Vocus Dark Fibre: Vocus Dark Fibre is a premium point-to-point connectivitysolution that provides a secure, scalable way to deliver multi-gigabit speedservices and allows to control the speed as an when business needs it.Vocus Dark Fibre is available in Sydney, Melbourne, Newcastle, Brisbane,Perth and Adelaide.

Vocus IP Transit: Vocus IP Transit solutions provide dedicated, carriergrade access with built in protection from Distributed Denial of Service(DDoS) attacks. VOC's main network route is carried via the Southern CrossCable AUS/NZ/USA undersea cable. In addition, VOC has a separate lowlatency connection to Singapore and onwards to Asia and Europe.

Vocus Ethernet: Vocus offers Metro, National and International CarrierGrade Ethernet services. Vocus Ethernet provides services that are designedto support real time applications such as Video and Voice and are suited forconverged networks.

Vocus Wholesale DSL: VOC offers wholesale layer 2 and 3 DSL services.Vocus layer 2 DSL services provide access to both iinet's and Telstra'sDSLAM coverage. Vocus layer 3 DSL services provide a DSL servicesbundled with IP transit.

Vocus Wholesale Voice: VOC offers wholesale voice services whichincludes: CTS (Call Termination Service), Number Allocation, NumberPortability, E1 and IP Access and Carrier Interconnect.

Acquisition On 26 October 2016, Vocus completed the acquisition ofNextgen Networks and two associated development projects, the North WestCable System Project and the Australia Singapore Cable Project.

Latest ResearchOne year into a three year growth story

Real earnings growth will need to wait until FY21 — VOC has delivered asolid

1H19 result and is making good progress in its turnaround. The companystill faces significant challenges in the Commander and Consumerdivisions and these are likely to weigh on earnings in the near term. In thelonger term we see accelerating earnings potential from Enterprise &Wholesale as the Consumer/Commander headwinds subside. We haveupgraded EPS by 2% in FY20-21 reflecting the improving earnings mix andour target price increases by +7% to $3.90/share as we factor in strongerlonger term earnings from E&W. We retain our Neutral rating.

For more information see research 28 Feb 2019.

GICS - Telco Services

Vocus Group Limited

ASX Code: VOC Price: $3.98 12 Mth Target Price: $3.90 Rating: Neutral

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Snapshot

DateMarket Cap.Shares on issue12 Month High12 Month Low

8 May 2019$2,477m622.3m$4.07$2.21

RatingRating12 Mth Target Price

Capital GainGross Yield

Implied Total Return

Neutral$3.90-1.5%1.1%-0.4%

Investment FundamentalsFYE 30 Jun 2018A 2019F 2020F 2021F

Profit $m 127.0 104.0 111.0 125.0Profit (norm)* $m 127.0 104.0 111.0 125.0

EPS* ¢ 20.0 17.0 18.0 20.0EPS Growth % -20.0 -15.0 5.9 11.1P/E* x 19.8 23.3 22.0 19.8P/E Relative % 0.0 0.0 0.0 0.0

DPS ¢ 0.0 0.0 3.0 5.0Yield % 0.0 0.0 0.8 1.3Franking % 0.0 0.0 100.0 100.0* Adjusted for goodwill and unusual itemsSource: Based on Citi estimates

Share Price Chart

Total Return on $10,000 Investment

Profit & Loss ($M)2014A 2015A 2016A 2017A 2018A

Sales Revenue 92 149 830 1,821 1,898Total Revenue ex. Int. 92 162 851 1,821 1,892EBITDA 33 57 235 361 368Depreciation & Amort. -12 -19 -78 -194 -230Goodwill Amortisation -- -- -- -- --EBIT 21 38 156 168 138Net Interest -2 -5 -24 -41 -41Profit Before Tax 20 33 133 127 97Income Tax -6 -8 -28 -34 -31Outside Equity Int. -- -- -0 -- --Profit after Tax 14 25 105 93 66Significant Items after Tax -1 -5 -41 -1,558 -5Reported Profit after Tax 13 20 64 -1,465 61Preferred Dividends -- -- -- -- --

Cash Flow ($M)2014A 2015A 2016A 2017A 2018A

Receipts from Customers 99 156 863 1,886 1,850Funds from Operations 34 47 167 191 324Net Operating Cashflow 31 43 136 131 252Capex -24 -35 -98 -219 -219Acquisitions & Investments -8 -54 35 -801 -2Sale of Invest. & Subsid. -- -- 20 -- --Net Investing Cashflow -32 -86 -43 -1,013 -221Proceeds from Issues 52 1 1 673 --Dividends Paid -1 -2 -51 -61 --Net Financing Cashflow 32 14 21 803 -24Net Increase Cash 30 -29 113 -78 8Cash at Beginning 14 45 15 129 50Exchange Rate Adjust. -- -- -- -- --Cash at End 45 15 129 50 58

Ratios and Substantial Shareholders2014A 2015A 2016A 2017A 2018A

Profitability RatiosEBITDA Margin % 36.05 38.37 28.30 19.84 19.38EBIT Margin % 23.28 25.83 18.85 9.20 7.29Net Profit Margin % 14.85 16.63 12.62 5.10 3.49Return on Equity % 9.94 12.62 3.30 4.03 2.81Return on Assets % 7.22 7.57 2.60 3.00 2.30

Debt/Safety RatiosNet Debt/Equity % 3.85 53.28 23.86 44.69 42.54Interest Cover x 11.73 7.29 6.63 4.10 3.38

Top 5 Substantial ShareholdersChallenger Limited 8.2%Greencape Capital Pty Ltd 7.2%The Goldman Sachs Group, Inc. 5.4%

Balance Sheet ($M)2014A 2015A 2016A 2017A 2018A

Cash & Equivalent 45 15 129 50 58Receivables 10 23 144 167 193Inventories -- -- 13 -- --Other Current Assets 2 4 48 110 114Current Assets 56 42 334 327 365Prop. Plant & Equipment 63 205 522 1,543 1,673Intangibles 85 125 3,757 2,212 2,108Other Non-Current Assets 5 4 48 110 114Non-Current Assets 156 341 4,360 3,844 3,864Total Assets 212 383 4,694 4,172 4,229Interest Bearing Debt 50 120 886 1,079 1,059Other Liabilities 25 67 634 789 816Total Liabilities 75 187 1,520 1,868 1,875Net Assets 137 196 3,174 2,303 2,354Share Capital 99 144 3,101 3,775 3,775Reserves 3 4 16 23 12Retained Earnings 36 48 57 -1,494 -1,433Outside Equity Int. -- -- 0 -- --Total Shareholders Equity 137 196 3,174 2,303 2,354

Current Analyst Recommendations *

* Source: Morningstar. This chart shows the spread of recommendations from thosebroker analyst's in Australia with research coverage of this stock.

Principals & DirectorsPrincipals

Company Secretary Ms Ashe-lee Jegathesan

Directors

Mr Robert (Bob) C Mansfield(Non-Executive Director,LeadIndependent Director,Non-Executive Chairman)Mr Bruce John Akhurst(Non-Executive Director)Mr Kevin Steven Russell(Chief Executive Officer,Managing Director)Ms Julie Austa Fahey(Non-Executive Director)Mr John Ho(Non-Executive Director)Mr David Stoddart Wiadrowski(Non-Executive Director)Mr Mark Callander(CEO of Vocus New Zealand,Executive Director)Mr Matthew Paul Hanning(Non-Executive Director)Mr Zhengyan Chua(Alternate Director)

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Vocus Group Limited

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