Is Telstra Going To Zoom Up Further?

  • Mar 30, 2019 AEDT
  • Team Kalkine
Is Telstra Going To Zoom Up Further?

A telecommunication service provider, Telstra Corporation Limited (ASX: TLS) operates in four segments; Telstra Wholesale, Telstra Operations, Telstra Consumer and Small Business and Telstra Enterprise. It offers solutions across television/internet protocol, mobiles broadband, telephony, digital content, online self-service capabilities, including buying, billing requests, management services for government and medium to large businesses. Additionally, the company functions into the development of industry vertical solutions, planning, design, engineering, architecture and construction, information technology and networks solutions.

The company announced bond issue (the Notes) priced at EUR 600 million for general corporate purposes, under its Debt Issuance Program Offering on March 12, 2019, circular. It will have a coupon of 1.375% with maturity on March 26, 2029.

In another update, Roy H Chestnutt acquired 43,000 ordinary securities (Indirect Interest) of the company with the total consideration of $138,629.23.

In its half-yearly result, the company reported a decrease in its total income by 4.1% to $13.8 billion, which was due to a roll out of the nbn™ Network. Excluding nbn™, the company’s underlying business performed well in H1 FY19, as it added 239,000 additional retail postpaid mobile services. About 125,000 mobile services were added by Telstra Wholesale, which comprised a mix of prepaid and postpaid. The company also witnessed positive momentum in IoT with revenue growth of 35.6%.

The company’s EBITDA (reported basis) decreased by 16.4% to $4.3 billion, and NPAT decreased by 27.4% to $1.2 billion.

The Board of Directors declared a fully franked interim dividend of 8 cents per share with payment date of March 29, 2019, and record date of February 28, 2019, which includes ordinary dividends of 5 cents per share and a special dividend of 3 cents per share in-line with the Telstra’s August 2017 dividend policy, which marks a fully franked ordinary dividends of between 70% to 90% of underlying earnings.

Telstra CEO, Andrew Penn, stated that despite short term challenges, they are excited with the significant increase in retail postpaid mobile services. They expect the demand for telecommunication products and services will continue to grow over the next decade. It is expected that with the onset of 5G, ARPU will improve. nbn wholesale prices are also expected to improve in the future, as per company’s T22 strategy announced in June 2018, to digitise the business and investments as per changing market dynamics and customer expectations. Importantly, Telstra may launch early 5G services in 2019.

In FY19, TLS expects total income in the range of $26.2 billion to $28.1 billion and EBITDA (excluding restructuring charge) in the range of $8.7 billion to $9.4 billion. $1.5 billion to $1.7 billion of EBITDA is expected to come from net one-off nbn definitive agreement receipts minus nbn net cost to connect; capital expenditures to be between $3.9 billion to $4.4 billion; cash flow to be between $3.1 billion to $3.6 billion. There are two reasons, which suggests that cash flow would be at the lower end of the range as Telstra’s capital expenditure is expected to increase in the enterprise and wholesale fibre markets and cash redundancies will be higher due to acceleration in the productivity. Increased competition in the mobile market is another challenge, which might affect the company’s revenue in the forthcoming year. However, the Board is confident in delivering sustainable growth by offering valuable services to its customers.

On the stock information, Telstra Corporation’s share price was noted at $3.310 on March 28, 2019, with the market capitalization of ~$39.49 billion. Its current P/E multiple is at 12.72x, and its earnings per share was reported at A$0.261. The company’s annual dividend yield stood at 3.77%. Its 52 weeks high was noted at $3.336 and 52 weeks low at $2.547. Its absolute return for five years, one year and six months are -31.81%, 5.58%, and 5.07%, respectively.


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