Don’t Miss! 4 ASX Marketing & Communication Stocks Amid COVID-19

Summary

• With people currently confined within their homes, telecom & online media content remains the sole source of entertainment and socialising
• Recently, WPP announced improved guidance backed by better trading performance in May-June coupled with benefits availed via JobKeeper payments in certain businesses
• Telstra reduced its holding in Foxtel as Foxtel faces disruptive industry setbacks owing to the COVID pandemic making significant impact on business & prompting advertisers to reconsider investments
• Chorus reported a gloomy quarter update with installations of fibre falling behind compared to last quarter amid COVID-19 restrictions
• HT&E decreased overheads, pay and working hours besides applying for JobKeeper payment option, to sail through the pandemic

Telecommunication and media sector has been experiencing bolstering demand since COVID-19 unearthed. With people confined within their homes, telecommunication and online media content has become the only source of entertainment and to sole medium to get social given strict social distancing guidelines.

To augment increasing online demand, telecommunication companies are ramping up their 5G services to provide faster speed, better customer and b2b experienceLow latency and higher bandwidth are other advantages of 5G technologyLikewise, as the world is currently overwhelmed by coronavirus pandemic, many telecom operators across Australia are adopting strategic measures to combat the crisis.

Let us glance over latest updates of few media and telecom operators, listed on ASX:

WPP AUNZ Limited (ASX:WPP)

WPP AUNZ Limited is engaged in communication, commerce, experience, and technologyIt operates in across Australia, South-East Asia and New Zealand with more than 4k employees and over 60 brands.

On 16 July 2020, WPP AUNZ announced an earnings guidanceIt expects earnings before interest and tax for 1H20 or the period ended 30 June 2020 to be in the range of $10 million to $14 millionThis is an improvement over the last guidance in which EBIT was expected to be between breakeven and $10 million lossThe improved guidance is possibly driven by exceptionally better trading performance in May and June besides availing additional JobKeeper payments worth $4 million in certain qualifying businesses.

The company expects aggregate non-cash impairment charge to be recognised between $150 million to $190 millionNet debt with earnouts was ~ $140 million at 30 June 2020 and the leverage ratio is expected to be ~ 1.7x for 1H20 Total debt facilities of WPP AUNZ stand at $420 million (to be expired in June 2021).

On 16 July 2020, WPP quoted $0.3.

Telstra Corporation Limited (ASX:TLS)

Telstra is one of the primary telecommunication operators in AustraliaIt was one of the first companies to introduce 5G in Australia and has huge plans to bolster its 5G implementation.

In May, Telstra announced that it anticipates making a non-cash impairment and writing down of 35% stake in Foxtel with an impairment charge of ~$300 million against this investmentThe impairment would devalue Telstra’s share in Foxtel from $750 million to $450 million.

Telstra CEO Andrew Penn highlighted that Foxtel has been experiencing industry disruption for years Moreover, COVID-19 has been making significant impact, prompting advertisers to reconsider investments.

In April, Telstra issued €500 million bond (~$860 million) with the maturity of 10 years under its Debt Issuance Program Offering to strengthen its balance sheetIn addition, TLS also secured additional $940 million via bank facilities, taking committed bank facilities to $3.6 billion.

On 16 July 2020, TLS quoted $3.460, down 0.28% relative to its previous close.

Chorus Limited (ASX:CNU)

Chorus offers telecom infrastructure with focus on utilizing hyper fibre to provide increased capacity, accelerate upload/ download speedsCNU network covers 580k homes via fibre, with 80% fibre roll-out completed.

On 10 July, CNU provided its Q4 update regarding COVID-19 impact on the quarter’s fibre growth-

• Fibre installations took a hit by ~15k and CNU halted UFB2 rollout owing to COVID-19 restrictions on non-essential activity.
• Reduced fibre installations and restraints on direct marketing led to a drop in Q4 fibre connection from 32k in Q3 to 27k in Q4.
• Decline in total fixed line connections by 4k to 1.41 million, excluding 10k free broadband connections provided to student households
• Broadband connections rebounded to Q2 level with 4k growth to reach 1.2 million, excluding 10k free broadband connections provided to student households
• Chorus further communicated that it further offered $5 million financial support to service companies to help with lessened field force workflow/revenue and support in workforce retention for quick recommencement of work in Alert Level 3
• UFB uptake grew to 60% within completed footprint in Q4Under the UFB contract, a multi-dwelling unit or single office block is considered as one premise.

On 16 July 2020, CNU quoted $6.95, down by 1.83% relative to its previous close.

HT&E Limited (ASX:HT1)

HT&E Limited is an established media & entertainment company that owns Hong Kong-based Cody as well, an outdoor advertising firmThe company engages in audio, radio and digital business across Australia.

Effective 22 June 2020, Ht&E Limited was removed from S&P/ASX 300S&P Dow Jones Indices had reported changes in S&P/ASX indices and under the rebalance, entire S&P/ASX index hierarchy was reviewed, including All Ordinaries.

Another setback amid the pandemic was HT1’s subsidiary, Australian Radio Network recording over 40% decrease in Advertisement revenues in AprilHT&E decreased overheads, pay and working hours and applied for JobKeeper.

In May 2020, the company highlighted that ARN delivered market leading ratings in 2019 and claimed to be the overall #1 metropolitan network in AustraliaHT1 also extended key talent contracts in Sydney and Melbourne and is developing unique digital and data capabilitiesHT&E mentioned that it has $111 million net cash and undrawn debt facilities worth $250 million as of 31 December 2019.

On 16 July 2020, HT1 quoted $1.080, down 1.8% relative to its previous close.

(Note: All currency in AUD unless specified otherwise)