TLS - Stock Update
Conclusion of Buy-back (Telstra Update)
Telstra (TLS) concluded its $1.35bn on-market buy-back last week. TLS share price has performed broadly in line with the market (Figure 1) despite ~16% turnover this year coming from the buyback. Other defensives like APA Group (APA), Coles Group Ltd (COL), Transurban Group (TCL) have all outperformed. With few meaningful catalysts expected over the next 2 months, there is a risk that TLS underperforms the market into FY results in August.
We would be buyers of any share price weakness. We believe earnings risks are neutrally balanced, small upside risks emerging following this week’s Mobile price rises, off set inflationary cost pressures. TLS trades on a 12-month forward PER of 23x and offers consensus 3yr compound earnings growth of ~7%.
Looking further ahead, the next round of InfraCo monetisation could be back into FY23E, which could see buy-back or special dividend. Telstra offers a current dividend yield of ~4.0%, with potential upside in FY23E due to InfraCo asset sales.
This commentary reflects our initial view. For detailed reports for companies under Sandstone Insights coverage, see our latest research notes for our investment view and specific risks associated with investing in these companies.
Figure 1. Relative performance: Telstra share price vs ASX200 index. Small underperformance this year despite the benefit of buy-back.
Source: Refinitiv, Sandstone Insight
Company overview
TLS is Australia’s largest telecommunications provider in both mobile and fixed line services.
Disclaimers and Disclosures
Issuer
The information and opinions contained within Sandstone Insights Research were prepared by MST Financial Services Pty Ltd (ABN 54 617 475 180, AFSL 500557) ("MST").
Reliance
Whilst MST make every effort to use reliable, comprehensive information in the construction of its reports, MST make no representation, warranty or undertaking of the accuracy, timeliness or completeness of information in this report. Save for any statutory liability that cannot be excluded, MST and MST employees, representative and agents shall not be liable (whether in negligence or otherwise) for any error or inaccuracy in, or omission from, this advice or any resulting loss suffered by the recipient or any other person.
General Advice
Any advice contained within Sandstone Insights Research is general advice only and has been prepared without taking into account any person’s objectives, financial situation or needs. Any person, before acting on any advice contained within Sandstone Insights Research, should first consider consulting with a financial adviser to assess whether that advice is appropriate for their objectives, financial situation and needs.
General Disclosures
This report should be read in conjunction with MST Disclaimers and Disclosures and is published in accordance with MST Conflict Management Policy which are available on the MST website: https://www.sandstoneinsights.com.au.
Currency of Research
The recommendations made in a Sandstone Insights Research report are current as of the publication date. If you are reading a report materially after publication, it is likely that circumstances will have changed and at least some aspects of the analysis may no longer hold.
Access and Use
Any access to or use of Sandstone Insights Research is subject to the Terms of Use. By accessing or using Sandstone Insights Research you hereby agree to be bound by our Terms and Conditions and hereby liable for any monies due in payment of accessing this service. In addition you consent to us collecting and using your personal data (including cookies) in accordance with MST Privacy Policy, including for the purpose of a) setting your preferences and b) collecting readership data so MST may deliver an improved and personalised service to you. If you do not agree to MST Terms of Use and/or if you do not wish to consent to MST use of your personal data, please do not access this service.
Equities Research Methodology
Please click here for information about MST equities research methodology.
Related Reports
Stateside
CAR made a presentation on its US business, Trader Interactive (TI) detailing the growth opportunity.
One eye on AI
A much improved second half year saved News Corporation’s blushes to the point where the share price has overcompensated, in our view. We lower our recommendation to Sell.
Below reserve
Domain’s trading update did not contain any positive short term news. However, the residential property market, on which its earnings depend, is exhibiting signs of improvement that will support an earnings jump in FY24f for DHG.