Telstra Corporation Limited

Appointment of New Group Executive, Product and Technology:Telstra Corporation Limited (ASX: TLS) is in the provisioning of telecommunications and information services, including mobiles, internet, and pay television. The market capitalisation of the company stood at $42.7 billion as on 18^th October 2019. Recently, the company has appointed Kim Krogh Andersen as Group Executive, Product and Technology, replacing Christian von Reventlow. Currently, Mr Andersen is serving as the Senior Vice President, Head of Global Technology Strategy of Telenor Group which is one of the major telecommunications companies, having operations across Asia and Scandinavia.

Revision in Guidance for FY20 Due to NBN Corporate Plan 2020: After the release of NBN Co’s Corporate Plan 2020, Telstra changed its guidance for FY20.NBN Co’s Corporate Plan 2020 provided an updated information regarding their outlook for FY 2020, including the reduction in total number of the premises forecast to be connected during FY 2020 from 2 million to 1.5 million. The changes significantly impacted the guidance which the company had provided for total income, underlying EBITDA and amount of included in-year nbn headwind, net one-off DA receipts less nbn net cost to connect, and free cashflow after the operating lease payments. Such changes led the company to update the FY 2020 cost reduction target from $660 Mn to $630 Mn.


 
Changed Guidance for FY20 (Source: Company Reports)
 
Stock Recommendation: The company’s stock has given a return of -5.28% and 5.83% in the last three months and six months, respectively. Currently, the stock is trading at a price to earnings multiple of 19.78x on TTM (Trailing Twelve Months) basis, which is higher than the median of the telecommunications services sector of 1.9x. The company’s debt to equity stood at 1.19x, which is higher than the industry median of 0.59x. As per the ASX, the stock is trading towards its 52-week higher levels. Hence, in view of the aforesaid facts and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $3.580 per share, down by 0.279% as on 18^th October 2019.
 

Westpac Banking Corporation Limited

The Bank Acknowledged the Release of a Discussion Paper by APRA:Westpac Banking Corporation (ASX: WBC) is one of the four major banking organisations in Australia and is engaged in banking, financial, and related services. The market capitalisation of WBC stood at $101.49 billion as on 18^th October 2019.

APRA (or Australian Prudential Regulatory Authority), recently released a discussion paper on proposed changes to APS 111 Capital Adequacy: Measurement of Capital.APRA has indicated that the proposed changes aim to ensure Australian deposit holders continue to be protected when the major banks hold significant investments in subsidiaries. Particularly, APRA is proposing that equity investments in subsidiaries (including any additional tier 1 and tier 2 capital investments in subsidiaries) will be risk-weighted at 250%, up to a limit of 10% of Level 1 Common Equity Tier 1 capital and equity investments in excess of 10% limit would be fully deducted from level 1 CET1 capital in determining level 1 capital ratios.

Company’s CFO to Retire in 2020: Group CEO of WBC, Mr Brian Hartzer, announced that Peter King, CFO, has decided to retire in 2020 after a career of 25 years with WBC.Mr King served as the CFO from 2014 and before that he was Deputy CFO.

Outlook for FY20: With the half-year results of FY19 announcement, the bank added that they are dealing decisively with the difficult commercial environment for banks, delivering the productivity savings and, at the same time, they continue to simplify the products, digitise the business, and modernise the platforms. As can be seen from the below picture, the bank possesses the robust balance sheet which might help it in the coming times.


Performance in 1H19 (Source: Company Reports)

Stock Recommendation: WBC’s stock has given a return of 4.57% and 7.49% in the last three months and six months, respectively. Currently, the stock is trading at a price to earnings multiple of 13.990x on TTM basis, which is higher than the industry average of 2.7x on TTM basis. As per ASX, WBC’s stock is trading towards the 52-week higher levels. Hence, in view of aforesaid facts and current trading levels, we give a “Hold” recommendation on the stock at the current market price of $28.840 per share, down by 0.825% on 18^th October 2019.

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