Vocus challengers leave after fight; Geoff Horth stays

Criterion long contended M2 — aka The Very Hungry Caterpillar — would chew up one purchase too many.

Activistic

Vocus Communications (VOC) $5.49

Told ya so.

Criterion long contended M2 Telecommunications — aka The Very Hungry Caterpillar — would chew up one purchase too many and end up with nasty indigestion.

Now merged with Vocus, M2’s tummy ache comes in the guise of a boardroom squabble — now apparently resolved — over who runs the sand pit.

Spilling its guts yesterday, Vocus said executive director James Spenceley and director Tony Grist had agreed to depart, after their proposal to remove CEO Geoff Horth was torpedoed by the four other directors (two of them from the old Vocus).

Horth, who is not on the board, was M2’s head honcho while Spenceley founded and ran the old Vocus.

Grist founded Amcom, which Vocus acquired last year.

The muffled signal down the string and jam tin is that Horth and Spenceley didn’t exactly hit it off, although it was not proposed that Spenceley take over from Horth.

The dissident duo quit after Vocus chairman David Spence (also chair of the old Vocus) demanded the matter be settled at Tuesday’s board showdown.

Vocus shares were sold off by a sedate 2.5 per cent yesterday, having already been under pressure since last month’s unrelated resignation of chief finance officer Rick Correll and rival TPG Telecom’s abysmal earnings outlook.

On the available evidence, the schism doesn’t suggest a strategic difference of opinion between the Vocus/Amcom and M2 camps. The former was oriented to fixed infrastructure, the latter towards the retail (consumer and small business) segments.

Spenceley maintains that a CEO with a “fresh set of eyes” is needed, although a specific candidate was not put forward.

In an unfortunately timed report, broker Citi on Tuesday described Vocus’s 35 per cent share price slide as “excessive”.

Maybe so, but when the birdies in their boardroom nest don’t agree we also get a queasy feeling. Avoid.

Australian Foundation Investment Company (AFI) $5.86

Most fundies bang on about their prowess at choosing the winning stocks and sectors, rather than the ones that got away.

But at yesterday’s AGM of the biggest listed investment company, management admitted the $6 billion fund’s performance had been weighed down by going light on gold, property trusts and gambling stocks.

These sectors have fired, especially gold and property trusts in the low rates regimen.

AFIC has a longstanding aversion to gambling stocks, a legacy of founding father Bruce Teele’s hard Presbyterian leanings.

Gold stocks, AFIC CEO Ross Barker warns, are influenced by factors “beyond the capacity of anyone to predict”.

AFIC, however, has more successfully surfed the trend by slightly lightening up on the banks and weighing into stocks outside of the familiar turf of the top 50. These stocks now account for 22 per cent of the $6bn portfolio, compared with 17 per cent previously.

Over the past three years, the fund poured $700m into selected stocks including the aforementioned TPG and halo stock CSL, which yesterday endured its first remuneration vote “strike”.

Given the slightly more adventurous portfolio this blue chip, blue rinse favourite, AFIC deserves its place in the bottom drawer of the walnut bureau. Hold.

Pushpay Holdings (PPH) $2.02, Activistic (ACU) 1.9c

With a handy share of the $US3bn US “faith” market, the charity payments platform has higher forces working in its favour than ASX variant Activistic.

Pushpay, which has been listed on the NZ bourse for two years, yesterday debuted on the ASX after a $40m private placement.

Pushpay provides a portal for US churchgoers to make regular donations in a sector in which the felt-lined bowl is still a common way to tithe.

Pushpay earns its daily bread through an upfront software fee and a margin on the credit card providers’ clip.

Pushpay expects to reach $US72m in annualised monthly revenue (the face value of the donations) by the end of calendar 2017 and also achieve cash flow break-even by then.

Pushpay’s solid showing contrasts with that of Activistic, which back-door listed at 10c apiece in May last year.

Activistic has a similar app-based offering and also targets the US religious market, as well as US veterans’ charities.

Pushpay CEO and co-founder Chris Heaslip says it was hard graft to sign up Pushpay’s complement of 5300 churches so far. “You have to approach them in an appropriate way,’’ he says.

Meanwhile, Activistic has offered to buy the unlisted “social gaming” outfit PlusConnect in a $3.4m scrip deal. Via its NT bookmakers’ licence, PlusConnect plans to roll out products including the Weather Lottery (aka the met bureau’s typical forecast for a Melbourne spring day).

In a tie-up which even AFIC would approve of, 20c of every $1 bet is slated for a charitable partner.

Pushpay is a spec buy on its track record to date. At the risk of being uncharitable, we’ll avoid Activistic given last year’s $6.6m loss on derisory revenue.

The Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author owns Vocus shares.