Not exactly a Bull case...

TCL’s massive capital raising to purchase part of West Connex in Sydney has weakened the share price. The retail entitlement came up short and has mopped up most buyer demand at both retail and institutional levels. At $10.80 for the SPP, today’s price of around $11.10 is starting to get perilously close.

The overhang from the capital raising is likely to keep the price weak in the near term. However, the expansion of TCL into this near monopoly market in Sydney is likely to give it earnings tailwinds for the years to come, once West Connex  comes online.

Debt remains at significant levels and hence it has interest rate vulnerability. Meanwhile the RBA is seeing no need to raise interest rates for the foreseeable future, so that risk is somewhat mitigated for now.

TCL is likely to have low volatility going forward with a steady-as-she-goes share price. In this sense it will act more like an ETF in its price movements with slow share price growth and a stable dividend. An unexciting stock but one that should deliver good returns over time when the dividend is included. Total returns of 7-8% pa (including 5% dividends) are the expectation over coming years. Hardly exciting, but not bad.