Pinned valuation:
I have decided to take RL position in TLS based on the following valuation. The earnings guidance market sell off triggered my interest to take a closer look
Sitting in my view a 10% discount with a current grossed up FF yield of between 6-7% on offer pa i feel TLS is ripe for a re-rate. Its under its 200SMA and based on its latest earnings guidance should... payout 9-10cents dividend. If they hit their targets, those dividends should lift to 20c and above in the next coupe of years. At this price that's a fwd FF yield of nearly 8% for a monopoly telco.
Fundamentally the T25 strategy looks on track, I am happy with the simplification of the business and the mobile business continues to grow. Combined with the infrastructure business and scale back of the enterprise business and cost cuts. They have the option to sell off infrastructure like they did previously but essentially my thesis is banking on the mobile monopoly that exists and the scarcity of any nearest competitor that can take away their market share.
Defensive monopoly business with a high yield
Will add a position to SM today
JW
I agree that TLS is good for a look in here, mostly for income-focused investors. Personally I'd like a price between $3-3.30 to make it really compelling - too bad it has rebounded off its recent lows.
@west FWIW to give you a little positive circular feedback :) - Gaurav Sodhi recently (24th May) wrote up a report for Intelligent Investor on TLS and he had it as a Buy (@$3.50) and Sell above $5 for somewhat similar reasons as you - he loves the mobile business and "over the next two years, we think cash flows and dividends will continue to rise modestly. By 2026, we expect dividends to rise to 20cps. At today's lower share price, a fully franked 6% yield is on offer and there are options to grow this further with more simplification or attention to the infrastructure business. Telstra should deliver high single digit returns from here, making it attractive for conservative portfolios"
I have noticed they had linked most of their plans to CPI. Which seemed reasonable (I remember having the same plan for years thinking how cheap it was because the price was locked in.)
then recently they unlinked the CPI and said they can put the plans up any amount!
now that’s monopoly power!