Telstra (TLS)

Discussion in 'Stocks & Derivatives' started by finicky, Aug 6, 2013.

  1. finicky

    finicky Well-Known Member Silver Stacker

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    What do you think - will it break through the $5.10 level?
    Personally I doubt it at this time, but not sure at all. The monthly chart shows the roughly $5 level is super resistant to Telstra. It has tried to break above that level for 11 years, achieving only a fake break-out for a couple of months in 2005.

    Monthly momentum is showing that the price action is just coming off extreme overbought level. Price has a bit more room to move on the weekly and daily charts, but momentum divergence looks like showing up there = warning.

    Oddly, Motley Fool Share adviser is tipping TLS this month on future fundamentals. Thinks there's now growth potential.
    Other seasoned commentators like Geoff Wilson are still talking about the 'bubble' in safe dividend stocks

    Hat's off to Nukz here who was pointing to Telstra back in May 2012 and reading the market desire for safety and yield very correctly. Telstra back then was $3.50 - 3.75. It's now $5, and the stock has also paid two, soon to be three, dividends since then.
    http://forums.silverstackers.com/topic-26261-my-low-end-targets-slr-ncm-evn-kcm.html

    Nukz
    2012-05-09

    "Not many people here have mentioned this before but TLS has got to be one of the best hedges against any fear in markets you could easily argue better than precious metals as of recent times.
    "... personally i like them because they're sitting on a mountain of cash, they pay a quite nice div, and so far the last 12 month performance has been up 35%."


    Nukz
    2012-05-15

    "Once again take a look at TLS, it's working as a hedge against falling markets."


    All Data Monthly Chart Telstra (TLS)
    [​IMG]
     
  2. Lunardragon

    Lunardragon Well-Known Member Silver Stacker

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    Just out of curiosity, the current issues in NBN. . Will this greatly affect its SP?
     
  3. finicky

    finicky Well-Known Member Silver Stacker

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    I'm clueless about it LD, so I'll sneak in a big excerpt from this month's Motley Fool's Share Advisor. I've left some bits out like the preamble and a few paras on risks of investing in TLS. Hopefully they won't mind as it's not the whole newsletter and is a bit of an ad for them.

    TELSTRA
    BY SCOTT PHILLIPS

    The 400-pound gorilla of the telecommunications space has an enviable brand
    and mobile network and an improving customer count.

    Why Buy:
    Mobile data will continue to explode, and the fastest and largest mobile network
    gives Telstra a three-length head start.
    A combination of an attractive dividend and nice price makes this a great time to
    add Telstra to your portfolio.

    1997 .....
    Since then, Telstra has become a vastly different business.
    Costs have been cut, governments were agitated against and
    then placated, mobile telephony has skyrocketed, and the
    then-nascent internet has become mainstream and mobile,
    with higher connection speeds and ever-faster computing
    power putting the world quite literally in our hand. Before
    we move to the rest of the investment case, though, we need
    to deal with the National Broadband Network.

    Telstra in 2013 still carries some legacy assets from its long
    history, including its declining but still very profitable fixed
    line (read: home phone) business, as well as using those
    same assets to connect homes and businesses to the internet.
    That will change if the Labor government is re-elected and
    continues to implement the National Broadband Network,
    which would assume Telstra's copper network, including its
    fixed telephony and internet services, under its Fibre To The
    Premises plan. Under a Coalition government, the terms of
    an alternative NBN remain unclear, with a Fibre To The
    Node strategy leaving Telstra potentially controlling part of
    the existing copper network or ceding it to the government
    on acceptable terms. In any event, comments from the
    Coalition suggest that Telstra and its shareholders will be no
    worse off should it win government later this year, and some
    analysis suggests Telstra may be in a slightly better position.

    Hidden in Plain Sight
    Telstra is far from the sleepy old business it used to be. True,
    for a while yet it will retain its legacy fixed line business a
    business which provides highly profitable if declining
    revenue for the company but Telstra isn't your
    grandmother's phone company any more.

    Not that you'd know it by looking at the results. Telstra's
    reported numbers look pedestrian by any measure. Sure, the
    absolute dollars are huge it turned in revenue of $12.5
    billion for the first half of the financial year and net profit of
    $1.6 billion but the revenue growth of 1.0% is pretty
    anaemic, even if profit growth of 8.8% was pretty good. So
    how is it that we can get interested enough in 1.0% growth to
    make it this month's 'best of the best' stock
    recommendation, we hear you ask? We're glad you did.

    Revenue Is Flat for Now
    The bad news for Telstra is that the number of fixed phone
    lines continues to decline. The company reported that
    151,000 phone lines were disconnected in the first six
    months of the financial year, and revenue fell by 10.8%.
    Compounding that, Telstra's fixed line business is incredibly
    profitable operating margins of 62% in the last half are
    more than 50% higher than mobile or fixed broadband so it
    feels that revenue loss very keenly...............................
    .................................................................................

    While that revenue loss is real, and impacts the business and
    its returns, it masks the growth of the remainder of Telstra's
    business. For example, Telstra's fixed broadband business
    grew by 4.4%, while the retail proportion climbed by 9.7%
    with a growth in customer count and average revenue per
    user. Mobile was up 4.6%, while its International and
    Network Applications and Services businesses, while
    smaller, both grew at over 10%. Impressively, too, Telstra
    managed to increase margins in all but its Sensis division, as
    cost cutting continues to deliver bottom-line results.
    Customer Service Improving
    If you've dealt with Telstra recently, you might have been
    pleasantly surprised. In multiple encounters with the telco, I
    Scott here have been impressed with the improvement in
    customer service. The knowledge of the operator,
    friendliness, speed and completeness of my queries or orders
    have all been very impressive, both in real terms but also a
    great leap forward compared to previous encounters.
    I wouldn't yet say Telstra is 'best in breed' when it comes to
    customer service, but in all of my dealings with service
    providers of all stripes, it would certainly win the award for
    'most improved'. Those improvements have real benefits for
    both Telstra's top and bottom lines. Happy customers are far
    more likely to remain with the telco, sign up for additional
    services and to recommend Telstra to friends and family.
    Retaining customers is always cheaper than acquiring new
    ones, so each customer 'saved' is a victory. On top of that, if
    a customer service issue can be dealt with in a single call, it
    can translate into real savings for the company. Not only can
    it have fewer staff on the front line, but rework is minimised.

    Capex Casts a Shadow
    Telstra has spent a large amount of money in recent years on
    capital expenditure the pits, towers and cables that let it
    shunt our phone calls and internet browsing around the
    country. That infrastructure spending is likely now past its
    peak, meaning we should see lower costs in future. While
    capex doesn't hit the profit and loss statement straight away,
    those expenses do turn up in future years, and a reduction in
    spending will see higher reported profits in coming years.
    Of course, a technology business like Telstra is going to
    continue to see lumpy capex requirements whenever 5G
    technology arrives, it'll likely bring new capex requirements,
    for example so we're not suggesting investment will never
    be needed again, just that the current numbers likely don't
    reflect a 'through the cycle' view.

    Growth Ahead
    If you're anything like us, your smartphone and tablet have
    become increasingly central to your work and personal lives
    (and if you're not like us, rest assured that there is a large and
    growing number of people who are at least in that sense!).
    Email, internet browsing, Skype, Facebook (for work, I
    promise!), maps, sharemarket quotes, weather, foreign
    exchange rates and yes, games were just some of the
    smartphone applications I accessed while I was writing this
    issue of Motley Fool Share Advisor. In the past week alone,
    I've also watched YouTube clips, downloaded music and
    listened to podcasts on my trusty iPhone.
    Our use of mobile data is exploding and Telstra, with its 4G
    network, stands to benefit most. It has the fastest network
    and largest coverage of any mobile provider, and in a market
    where scale matters, only a thoughtless and uncorrected
    misstep will see it cede that advantage to the other players.
    Telstra's aggressive move to tie up sporting content and its
    'Thanks' program also make the company 'stickier' for
    customers, while opening up revenue opportunities from
    other carriers' customers. And while fixed line revenue
    declines continue to depress revenue, that segment is getting
    progressively smaller, while mobile, services and its
    international businesses get larger a transition that should
    see progressively greater overall revenue gains.

    The Foolish Bottom Line
    We've almost made it right through our recommendation
    without once mentioning Telstra's almost-more-certain-thandeath-or-taxes
    28-cent-per-share dividend. It shouldn't be
    underestimated, though at current prices, that 5.7% return
    is 8.1% grossed up to include franking credits. It's also likely
    to be increased at some point in the next year or two.
    Add in a trailing price/earnings ratio of 15.7 times, which is
    unfavourably impacted by capital expenditures and the
    continued explosion of mobile data consumption and a yet
    uncertain combination of cash and revenue from the NBN,
    and we think now is a great time to add this quality core telco
    to your portfolio.

    shareadvisor.com.au
     
  4. boyracer

    boyracer Member

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    some background - I bought TLS heavily in the low $3's as part of my expectation of people starting to chase yield after a disappointing period of zero capital gains. I yelled at my dad when he sold for about $3.70 as I thought it would break $4 easily and maybe $5 by the end of this year. That came earlier than I thought and I sold out for $5.

    I really wanted to keep them for the dividend and should have bought back in when they dropped to $4.50 with the market pullback and asbestos scare but I got distracted and missed my opportunity.

    My reason for selling despite liking the stock is simply my concern it had got ahead of itself as people just chased yield. I could see it in a lot of the stocks I owned, SPN, SKI, BWP, DUE. All going up heavily, not due to growing earnings but people chasing yield. I did not own any banks but the effect was the same with them also - price up, yield down, risks ignored.

    From here I think TLS may still go up (interest rates are still falling) but there are downside risks that were just not present in $3-4 range. As you say Finicky, TLS has form for headbutting the $5 mark but not being able to punch through it.

    The economy is faltering and that may impact earnings in mobile and internet as non-payment of bills increases or people downgrade to cheaper plans although that is not a major concern.

    My main concern is people start chasing capital gains again instead of yield and TLS falls out of favour (again). That would probably take some time to play out.

    To be honest, I am 100% sold out of the sharemarket as of May this year so a 20-30% fall in the market would be good for me. I'd buy back in to TLS at anything around the $4 mark and be comfortable with the investment even it if fell further than that.

    For now, TLS is overpriced for me not on fundamentals but based on the fickleness of the market.
     
  5. Ouch

    Ouch Active Member

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    I'm buying it all the way up to $6.00! Wish me luck!
     
  6. Court Jester

    Court Jester Well-Known Member Silver Stacker

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    I think that Telstra shares are popular atm because of the dividend return is better than a term deposit currently. Telstra are also a pretty safe bet i.e. unlikely to go bankrupt any time soon.
     
  7. finicky

    finicky Well-Known Member Silver Stacker

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    ^^^ Do you read the prior posts in a thread?

    Quote:

    Nukz
    2012-05-09

    "Not many people here have mentioned this before but TLS has got to be one of the best hedges against any fear in markets - you could easily argue better than precious metals in recent times.
    "... personally i like them because they're sitting on a mountain of cash, they pay a quite nice div, and so far the last 12 month performance has been up 35%."


    Nukz
    2012-05-15
    "Once again take a look at TLS, it's working as a hedge against falling markets."
     
  8. Court Jester

    Court Jester Well-Known Member Silver Stacker

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    usually but I didnt read the wall of txt in the 2nd post, and what I posted was slightly different to your highlited point

    I like Telstra but I don't own any I see better value in other shares atm. ( RFG is one )
     
  9. J-Money

    J-Money New Member

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    I have that subscription too Fin, still considering. It goes ex-div very soon, and would expect the usual sell-off afterwards.
     
  10. trew

    trew Active Member Silver Stacker

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    Not disputing the share price has gone up and has been a good bet for the past year, but they are certainly not sitting on a mountain of cash
    They may hold cash but they are geared up to the eyeballs - over 100% debt to equity
    Their NTA has been falling for the past 10 years because they keep paying out more in dividends than they make in profits

    I suppose you can run high borrowings when you are the size of Telstra, but if interest rates start rising in the future they will be very exposed to that.


    TLS was an easy buy a couple of years ago while the future fund was selling down their stake.
    They were bound to go up again once that selling finished.
     
  11. finicky

    finicky Well-Known Member Silver Stacker

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    Yes, that's my feeling. Already has headwind from the relentless share price rise, then the div goes ex, then it's supposed to break above 11 years of resistance sustainably? Not ruling out temporary break. Intuitively, true break doesn't look all that probable. I'm prepared to miss out anyway if wrong. FY results due next few days?

    Equable response to my too blunt comment Court Jester :cool: Maybe you got the M Fool free recco? Note that Retail Food Group (RFG) was first recommended to MF subscribers in 20-Dec-12, BUY @ $2.97

    "The Motley Fool's Top Dividend Stock of 2013-2014

    Retail Fool Group (ASX: RFG) should be a name Motley Fool Share Advisor subscribers are already familiar with, given we recommended it as a buy back in December 2012, and have maintained it as a buy recommendation on our scorecard ever since. The stock is up nicely since we first picked it, but obviously we still like it, and its 4.4% fully franked dividend yield."

    Well just going on the company historicals at Comsec this is dated criticism. It was mostly under Trujillo that that was going on wasn't it? I get divs exceeding eps in FY's 05, 06, 07, and 2011. But in FY2012 eps was 31.5c and div was 28c
     
  12. trew

    trew Active Member Silver Stacker

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    Yes it is dated and I'm not forecasting the future will be the same
    Don't get me wrong they have some good numbers - ROE is over 30% which is fantastic, although that is probably partly due to the high debt level and interest rates going down

    Effectively though TLS is a no growth company.
    They are limited to Australia and are already the biggest
    EPS is the same as it was 10 years ago.
    Which would be fine if the PE was 8 but it is 16


    If it wasn't for the high dividend the share price could be much lower.

    It will be very interesting if they start to expand beyond Australia.
    On the one hand it would provide more chance of growth
    but on the other hand they may have to cut the dividend if they need more capital to grow - or increase borrowings even further


    I'm often wrong though so don't listen to anything I'm saying
    I've thought all the banks are fundamentally f**ked for years but their profits and share prices keep going up
    Soon the entire ASX will consist of just the four banks
     
  13. boyracer

    boyracer Member

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  14. finicky

    finicky Well-Known Member Silver Stacker

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    Telstra rings in profits August 08, 2013 09:40 AM

    Telstra Corporation Limited (ASX:TLS) has posted a big lift in net profit for fiscal 2013 and says it expects to continue to grow revenue and earnings in the year ahead as it builds out its 4G mobile network.

    In the year to June 30, the telco's net profit was $3.8 billion, a 12 per cent increase on the previous year's result.

    The net profit figure exceeded analysts' profit expectation of $3.77 billion.

    In the same period, revenue was $25.7 billion, a 1.2 per cent jump on year.

    Telstra will pay a fully-franked full-year dividend of 28 cents on September 20.

    http://www.finnewsnetwork.com.au/ar...il&utm_term=0_ebb2490e1c-0ec79a2021-137602186
     
  15. Matthew 26:14

    Matthew 26:14 New Member

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    Yeah I got on Telstra @ $2.90 back in 2010 and is the largest single holding in my portfolio. People now say what a good buy that was, considering I've also received 14c x 6 fully franked dividends. But at the time remember the NBN outcomes were still unknown and Telstra was dying a slow death from its copper network. The dividend at the price I paid amounts to 9.6% tax paid or about 12.5% gross. There's a reason the dividend yield was so high and that's because it looked unlikely Telstra could maintain its dividend in the face of falling revenues.

    But today its a different story. 3G & 4G offer Telstra an unrivaled service and the NBN has been sorted out to the tune of $11Billion to shareholders.

    Would I buy Telstra at $5? Probably not. But I'm not selling at $5 either :)
     
  16. finicky

    finicky Well-Known Member Silver Stacker

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    Keeping me guessing. Not a savage reaction to the stock going ex dividend. Div is 14c, stock down 15.5c with half an hour to the close, spinning top indecisive candle (although I just notice a bit of deterioration from the uploaded position). I was expecting more reaction frankly as the stock is still strongly overbought on monthly and has recently bumped up against 11 year resistance, as discussed.

    [​IMG]
     
  17. SilverSanchez

    SilverSanchez Active Member

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    We inherited telstra shares, so they're no cost, no need to sell - just let it mature for a decade
     
  18. finicky

    finicky Well-Known Member Silver Stacker

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    From 5.10 that's the full dividend for the year gone out of Telstra's share price now. Full year div FY13 was 28c.

    It looks like it wants to go down further. I'm thinking a good chance of 4.50 now?
    $4.50 looks to be the critical level to hold, very confidence shaking if that broke.

    [​IMG]
     
  19. boyracer

    boyracer Member

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    ^^ finicky - I'd agree that sub $4.50 seems more likely than it did a few weeks ago. Perchance a buying opportunity beckons. I'll certainly be keeping a close eye on it.

    Toi be honest though I think you need to push that graph out further - the $4.50 reached in April was simply a temporary plateau after a strong run up - not sure it really is a critical level.
     
  20. finicky

    finicky Well-Known Member Silver Stacker

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    If it comes back to 4.50, which I put at a strong chance, I'll buy a third probably.

    If 4.50 breaks, which I couldn't rate yet, I'll be waiting for an opportunity at 4.00 or 3.75. I think TLS 4.00 or 3.75 is possible, not saying it's likely unless a break of strong support level of 4.50

    History:
    4.50 looks like mid point or 'point of control' of price ranges in 02, 03, 04 and 07, 08. Then price had strong bounce off 4.50 this year
     

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