VODAFONE (VOD) 229.3p

Gain to date: 8.5%

Original entry point: Buy at 211.4p, 12 October 2017

We said the market was being too gloomy on Vodafone (VOD) and half year results illustrate the point. Investors were caught on the hop by the mobile network giant’s upbeat message, with continued organic revenue growth in most markets.

Full year guidance for earnings before interest, tax, depreciation and amortisation (EBITDA) has been raised from the previous 4% to 8% growth range to ‘around 10%’.

That’s helped by having properly converged communications – mobile data, broadband, enterprise, cloud etc. There’s also the push for cost reductions, while even problem child India is showing signs of improvement.

The UK remains an issue, although service revenue declines here are slowing. The agreement with dark fibre network builder CityFibre Infrastructure (CITY:AIM) will make a massive difference in time, bringing the converged communications opportunity that should bolster margins.

For example, UK EBITDA margins are 18.9%, barely half the Germany and Italy levels.

There’s also more confidence in the dividend, with the shares yielding a generous 5.8%.

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