TLS - Telstra Corporation

[MrChow]

TLS board comparison:

ASF predicted what happened, HC 200 posts from delusional gamblers telling everyone to buy their losses.

 

[sptrawler]

TLS board comparison:

ASF predicted what happened, HC 200 posts from delusional gamblers telling everyone to buy their losses.

I think we will see Boggo's prediction of $3.50, in the short to medium term, then your prediction of $2.50 in the longer term.
They really only have themselves to blame, relying on a gold plated system, that is tarnishing more every day. The end result will be just another telecom re seller, unless they can come up with the magic pudding, but they have already had plenty of time to find it to no avail.
Once they settle into stable model, after the NBN and they have transparent ongoing growth and income, they will probably be a good income stream.
But I believe, a lot of water has to go under the bridge, before that happens. Just my opinion.

 

[MrChow]

I'll probably be proven wrong.

But one thing I know is that having an informed investment method gives you a better chance than investing based on pumping and confirmation bias.

 

[Boggo]

...
They really only have themselves to blame, relying on a gold plated system, that is tarnishing more every day. The end result will be just another telecom re seller, unless they can come up with the magic pudding, but they have already had plenty of time to find it to no avail.

Yes, an attitude towards the public like they have and there really is only one way it's going to go but they still don't seem to get it.

Once the planners all start having to explain to their clients why both the price and the yield is falling Mum and Dad sentiment will change to reflect reality, imo.

 

[PZ99]

A bit of light reading

Telstra: Stockbrokers describe 'extraordinary' market scenes as investors dump communications giant

Telstra is the most widely held stock by small investors, partly because of its big dividend — but that is all about to change.

Key points:

• Dividends set to be cut 30pc to 22 cents per share
• Telstra's faces NBN-induced erosion of traditional fixed-line phone, internet businesses
• Once NBN rollout is complete in 2019 Telstra will need to start investing in its business again

On Thursday, the CEO announced the dividend was to be slashed by 30 per cent, to just 22 cents per share, because of uncertainty around the telco's financial future.

Michael McCarthy, head of market strategy at CMC Markets stockbroking, watched events unfold from his trading desk.

"Trading in Telstra this morning was extraordinary," he said.

"It was one of those days that really draws market attention because the volumes were enormous and the price movement was huge.

"In the first seven minutes of trading more Telstra shares changed hands than it changes hands in an average day, that's how big the trading was this morning."

Mr McCarthy said as a market watcher the day's trading was "fascinating", however he had plenty of sympathy for Telstra shareholders.

"Never far from our minds when we see major stock like this falling — particularly one that's so wildly held — is [that] a lot of investors were hurt," he said.

Why has the dividend been slashed?
Put simply, Telstra — as a business — does not think it will have the cash to stump up.

Telstra's facing an NBN-induced erosion of its traditional fixed-line phone and internet businesses.

Its chief executive, Andy Penn, said given the price NBN charges telcos to use its lines will likely double in coming years, Telstra will probably take a $3 billion hit every year.

Telstra does receive something akin to 'rent payment' from NBN for use of its existing infrastructure, as well as a $9 billion payment, spread over several years, as compensation for Telstra giving up its traditional wholesale business — but that does not fill the gap.

"Up until this point Telstra has basically been paying out everything it earned to its shareholders," Mr McCarthy said.

"It had very strong cashflows from its existing operations, and while growth prospects for the future are clouded, it the short term it was prepared to pass all of that income through.

"Telstra is now acknowledging that once the NBN rollout is complete in 2019 it will need to start investing in its business again, and that means it can no longer afford to pay 100 per cent of its income to shareholders."

Mr Penn fronted the cameras on Thursday morning, attempting to soothe market anxiety.

"We do not underestimate the impact of this on our shareholders," he said.

"This is about setting the business up for the future, giving ourselves the flexibility to invest, and to compete effectively," Mr Penn said.

Self-funded retirees in firing line
Mark McDonnell, a 64-year-old self-funded retiree, is typical of the type of investor that has clung to Telstra through thick and thin because of the big fat dividend cheque that comes in the mail every six months.

He said he was not surprised when Telstra reported the 33-per-cent dive in full-year profit to $3.9 billion.

But he described the 30-per-cent cut in the dividend to 22 cents as "sobering".

"Telstra has clearly signalled a sustainable path to the future around the price point for dividends that is consistent with its current share price," he said.

"I think investors will need to — as sobering as that is — they need to take that fully into account."

Mr McDonnell said Telstra's dividend bombshell rana close second to the Commonwealth Bank's earnings announcement in terms of its investor significance.

But, speaking philosophically, he said it was all part of the August reporting season roller-coaster.

"There have been a few dramatic developments on a few fronts," he said.

"CBA has certainly been in the news quite a bit. Andy Penn hasn't lost his job, unlike [CBA boss] Ian Narev."

"No, I have to say it's all relative to the swings and round-a-bouts of August [full-year reporting season] that come each year."

Telstra shares closed the day down 10 per cent to $3.87.

http://www.abc.net.au/news/2017-08-17/telstra-dividend-slash-sobering,-says-investor/8817882

 

[Triathlete]

Plays by the rules doesn't it. EW has worked well on this stock for quite a while now including when it was on the way up.

Exactly..!!...Spot on with your previous charts Boggo.....good work....!!

I am also looking for a move lower towards $3.95 to $3.75 for TLS....[/QUOTE]
I guess this from Jun13 turned out ok....

I wonder if their is going to be further downside.......any further views at this early stage, I am out at the moment???

 

[sptrawler]

Talk about luck, I wonder what TLS would have gone to today, without the trading halt.

 

[MrChow]

I've examined the announcements again and am actually more bullish on the rebasing of earnings post NBN completion, but am more bearish on organic prospects.

So I am updating my model with the new information (apologies if getting repetitive):

Earnings Rebase:
-35% NBN completion by 2021
-5% NBN Securitization Spinoff by 2019
-40% Total

Offset by initiatives:
+15% Cost Cutting by 2022
+5% Capex Investment Returns by 2021
+5% Buybacks from Spinoff Proceeds by 2019
+25% Total

So we're looking at being -15% for an EPS rebase which gets us to around 28c.

That is higher than other figures I've projected between 25-27c previously. So to project a floor price I'd use a decade low average PE of 10 that get's us closer to $2.80 which if given some margin for error indicates a downside range of between $2.50-$3.

The main issue with this now though is that the 3 divisions (Mobile, Fixed, Data IP) that make up 80% of earnings all had organic declines. Given there's no forecast for these divisions in the same way TLS has provided forecasts for the earnings rebase the simpliest thing to do is just budget for flat organic returns which means it has no affect on the model which may turn out to be a generous assumption.

I should point out that it may not be even that complicated. The TLDR method is that every All Ordinaries stock in the 2008-2009 period had a -30% SP loss so that would project similarly at $2.50-$3.

 

[Boggo]

There is a possibility that it will close this gap, may sucker a few in.
It has hit the predicted minimum target area, could be more to go as others like sptrawler and Triathlete are saying.

Daily at Aug 17th.

 

[So_Cynical]

At some point the bad announcements and negative sentiment will stop, the mobile network is still a major asset and they have cash, another buy back down the road perhaps?...there are worse stocks, the challenge is to identify the bottom.

I figure the smarter money has been selling over the last 12 to 18 months expecting the divi cut to come, the not so smart money sold after the announcement, how many more bad announcements to come? this is the question.

 

[galumay]

how many more bad announcements to come?

Its hard to know with Telstra, one thing that occours to me is that they are such a badly run company, with such a bad reputation with consumers that there are presumably not too many more things that could go wrong!

I have never looked into TLS in detail so have no idea what sort of valuation I would find for it, but if I were interested that would be my starting point, try to work out what the business is really worth going forward. The old addage that there is no company so bad that its expensive at any price rings true.

 

[rb250660]

Anecdotally, the thing with Telstra, and I speak for myself and many people I know, is that we wouldn't even consider using another mobile carrier. I used to work in the bush and if you had Telstra mobile you got full reception, other carriers were 'No service'. This is the case at times in densely crowded city areas too I've found in the past. I've been with Telstra mobile for 21 years continuously and I'm not about to change.

 

[galumay]

I've been with Telstra mobile for 21 years continuously and I'm not about to change.

I live in a remote area, for many years we had no choice but to accept the price gouging rougues, Tel$tra, but those days are gone now, there are resellers of the network that are much cheaper and people are moving in droves. So the days of TLS having dominance in the bush are disappearing, other networks are gaining as well, the days of TLS having the bush to themselves to rip off are going.

Regardless, its probably the one area of the business where they still dominate and hold a reasonable market share. TLS was greatly helped by the taxpayer paying for the mobile network infrastructure - and then having to pay TLS to use the network they had paid for!! Nice corporate welfare if you can get it!

The question is, even if you are right and they can at least maintain their market share in mobile, how much is that part of the business worth in a per share sense? I have no idea, but i bet its less than $3.

 

[Boggo]

...
So the days of TLS having dominance in the bush are disappearing, other networks are gaining as well, the days of TLS having the bush to themselves to rip off are going.
...

Mate of mine has a shack on the Yorke Peninsula and when we were there last time a discussion came up about phone companies etc.
I am with Optus and he is with telstra and he used to have better reception with telstra than what I would have with Optus. He still thought that telstra was the only one that would work there.
I showed him my phone which had 5 bars of reception while his had three .

This got me fired up yesterday.
Mother in law who is 79 and slowing down a bit has a mobile phone plan with telstra that has expired.
My wife has explained that there are now cheaper plans etc available that we need to look at for her.

Yesterday my wife got a call saying that she had been to a telstra shop and she was going to keep this phone because the nice man had "given" her $30 credit on her phone.

Wifey spent the next 10 minutes trying to explain that the $30 that the "nice man" had given her would actually appear on her next telstra bill, I still don't think she understands and needless to say any further contact re new phone is not to happen without supervision.
Wrong way to treat customers telstra

 

[Bill M]

When I go into shopping malls the Telstra shop still has more customers than the Optus and Vodafone ones do. Plus all my mates tell me their Telstra mobile and 4G networks have more coverage than anyone else. Not much to go on but that's what I see and that's what people tell me.

Also, people are writing off the dividend as though there won't be any anymore. Even with the slashing of the dividend to 22c per share per year, it means that at the current price of $3.90 it equates to a fully franked dividend of 5.6%.

Having said all that doesn't mean diddly squat, it is what it is and the dividend to come this Month is still 15.5c per share. I hold a small parcel of TLS and I am not selling as it is in my super fund and it is in pension phase so all those franking credits come back to me as well.

I might add, I cut all my services from Telstra and I use just about everyone else for everything. TPG for unlimited NBN, Amaysim, Aldi and Lebara for mobile. All of those have better deals price and allowance wise than Telstra.

Maybe what they need to do is meet the market price wise. If they did that perhaps they might just knock off the competition, but as long as prices remain higher than others things might get worse. Just my worth.

 

[MrChow]

Even with positive characteristics about it's regional monopoly and instrastructure - Mobile Earnings declined in FY17. They did grow subscriber numbers but ARPU declined. I'm not sure that's a good thing.

 

[Triathlete]

I think we will see Boggo's prediction of $3.50, in the short to medium term, then your prediction of $2.50 in the longer term.

I have to agree also based on EW at the moment...

 

[galumay]

Wrong way to treat customers telstra

Its a constant story with TLS, after all these years, customer service is still some of the worst in Australia. That inability to change the culture worries me in terms of management competence.

With NBN i see it every day, we do the NBN installs here and Telstra stuff up orders and provisioning all the time, they have really struggled with the transition from being a wholesaler to a retailer of broadband.

I have never looked at TLS as being an investible business, but if I did I would want a larger margin of safety to compensate for the culture and management!

 

[Miner]

Its hard to know with Telstra, one thing that occours to me is that they are such a badly run company, with such a bad reputation with consumers that there are presumably not too many more things that could go wrong!

I have never looked into TLS in detail so have no idea what sort of valuation I would find for it, but if I were interested that would be my starting point, try to work out what the business is really worth going forward. The old addage that there is no company so bad that its expensive at any price rings true.

I am not a great fan of Telstra but I often hear bad customer service. Telstra's customer services are far superior nowadays than getting someone on the phone at Amaysim, TPG, VOC, Optus and alike. Telstra at least returns the phone call.
What has recently called to ASIC (if I may digress)? What was the waiting time - 26 minutes or so. My house falls ironically in an area where I have the only choice - TELSTRA and Cable for Big Pond. The person stays next door enjoys ADSL but unhappy with TPG.
Put a buy note @$3.50 on TLS.
Please also consider the volume TLS holding by all investment brokers and super funds. So they will all try to pump the shares as best as they can consolidate over next two weeks. So my gut feeling TLS will not go down below $3.8 until another 4 weeks.
DNH

 

[So_Cynical]

Put a buy note @$3.50 on TLS.
Please also consider the volume TLS holding by all investment brokers and super funds. So they will all try to pump the shares as best as they can consolidate over next two weeks. So my gut feeling TLS will not go down below $3.8 until another 4 weeks.
DNH

Yep, pick a price level under $3.80 and accumulate without getting carried away or like you're in a hurry, cos this mite take a while, bottom could be close or 18 months away.