Week Ahead, Podcast | Telstra

5 December 2019

​Global markets ​were lower on Friday, to wrap up what was ​a strong month were equities, with markets around fresh all-time highs.

​This week's Stock Market Movers podcast is Fisher & Paykel, Burger Fuel, Moa & Greencross. To listen CLICK HERE.​
 

Stock in Focus: Telstra (TLS:ASX / TLS:NZX)

​TLS was up on their investor day presentation, despite reiterating operating earnings for the 2020 financial year would remain unchanged and about -7% lower than the previous year. 

Soon after it prompted a number of brokers to upgrade their recommendation as they identified the Australian mobile market may have reached its turning point, and that Telstra’s dividend appears sustainable and relatively attractive with scope of growth in future – as Telstra lowers their capital expenditure. The competitive mobile industry is expected to have another challenging year for Aussie Telco’s with price competition looking to ease and Telstra likely to benefit from the roll-out of their 5G technology, which is expected to resurge the market like previous technologies (3G and 4G) have done so in the past. Also given their heavy capital investment in the past, Telstra’s capital expenditure guidance suggests there is adequate cashflow to sustain their current dividend with the possibility of growing. 

Telstra is now trading at a 4.1% dividend yield and a forward price to earnings multiple of 19.1x – which is not cheap considering lingering headwinds remain and another year of declining earnings is expected. We remain on the side-lines, largely due to valuation – and being less optimistic on any group level growth with near-term risks still persistent. We would feel more comfortable upgrading our recommendation if we saw a bottoming out in earnings and better risk adjusted valuation.

We currently have a HOLD rating on Telstra
 

   
Australia & New Zealand Market Movers

​The Australian market ​retraced on Friday (ASX 200 index ​-​0.​26​%) but still ended the month with a 2.7% gain. In stock news, Select Harvests jumped after a successful year the nut grower attributes to a bigger than expected almond crop, firmer prices and the shrewd navigation of an expensive water market. Zip Co is holding a $60 million capital raising to support its entrance into the United Kingdom. Zip is offering shares at $3.70 per share, a 5​% discount to its closing price from Thursday, in the hopes of raising $50 million. 

​​The New Zealand market ​rallied on Friday (NZX 50 index +0.98%) with the market up a whopping 4.9% in November as retirement village operators were boosted by potential merger and acquisition activity and A2 Milk mounted a comeback on strong earnings guidance. ​Meridian Energy led the market higher​ on Friday as it was reported​ that energy minister Megan ​Woods has directed officials to give her advice on material from Rio Tinto on how to reduce its energy costs.​

 

3 Things Markets Will be Watching this Week

  1. ​In NZ, t​he RBNZ ​is ​due to announce the new capital requirements for NZ banks and the ComCom due to release the final Fuel Study report.
  2. The Reserve Bank of Australia meets on Tuesday and markets expect the bank to keep interest rates on hold.
  3. Closely followed US payroll and manufacturing surveys are released this week. ​
     

 

Have a Great Day,
 

Team

​Global markets ​were lower on Friday, to wrap up what was ​a strong month were equities, with markets around fresh all-time highs.

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