Telstra Corporation Limited
Telstra Corporation Limited (ASX: TLS) with a market cap of $36.04bn has undergone several transformations in the year 2018. In line with its transformational activities, Telstra introduced T22 strategy. The strategy aimed at providing simple and flexible products and solutions embarking a great digital customer service experience.
Moderate growth overcoming the disruptions in marketplace: Despite of the challenging environment faced on account of new competitors and digital revolution, Telstra posted strong subscriber growth under both fixed and mobile services in FY18. Addition of 342000 customers under retail mobile and 88000 customers under retail broadband services was recorded in FY18. 3% rise in the total income up to $29 billion was recorded in FY18. EBITDA showed 5.2% drop up to $10.1 billion and impact of NBN on Telstra NPAT showed 8.9% drop up to $3.5 billion. Revenue from Networks, Applications and Services business NAS posted 8.6% rise up to $3.6 billion and the company continues to expand the margin in this business.
Efforts to simplify product portfolio through T22 Strategy: Reduction in the product offerings will increase the simplicity, transparency and satisfaction that customers will experience. It will also help in the reduction of the material cost. Reduction of Products across Consumer & Small Business (C&SB) from 1,800 plans comprising 1,400 legacy and 400 active plans, to a simple menu of 20 plans will be implemented which will be accessible by a single click of a button with no contracts and instant activation. Such simplification will be brought through T22 strategy which will not only simplify the process and reduce the product size to 20 but will provide improved customer experience as well.
Meanwhile, Telstra announced about resignation of Robyn Denholm as CFO.
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FY19 Guidance (Source: Company Reports)
Technically,after showing the upside move during the month of September, the scrip turned completely bearish in the month of October. In the current month of November, the scrip has again started showing signs of recovery and is trading near the middle bollinger bands. On a 3-month time frame, with monthly interval, candles are showing recovery after bearish move made in the month of October. Relative strength index and Moving average and convergence indicator (MACD) consolidating in negative territory with sign of positive divergence on price charts indicates some upside trend.
Fundamentally,the market cap of TLS was recorded at $36.04bn, with a low P/E of 10.11x and beta below 1x as on November 13.Sustainingin the disruptive market environment along with the introduction of T22 strategy might erase legacy profits for short term but will place the company in strong position for future. We maintain a “Buy” on TLS at the current levels of $3.05.
MFF Capital Investments Limited
MFF Capital Investments Limited (ASX: MFF)has extended the service arrangements provided by Magellan Asset Management in the month of October for a period of 2 years. Under this service arrangement, financial terms will remain same as last year until the year end 2022 with an exception of no payment of the performance fees during the extension period.
Strong Financial Metrics:MFF holds a very strong balance sheet with easy access to debt and equity markets. MFF recorded a net profit of $239.9 million for the year ended June 30, 2018. Total equity recorded as on June 30, 2018 was $1238.2 m, with retained profits comprising of $635.8m and contributed equity of $602.4m. Net cash position of $78 million was recorded on September 30, 2018. Out of which $40m is kept separately to meet payments related to expense, dividend and tax that will be accrued or payable in the December quarter.
Well positioned portfolio with proper evaluation of risk factors: MFF holds a strong portfolio with focus on advantaged business keeping risk strongly in consideration. Well concentrated portfolio with timely rebalancing as per the changing market scenario keeps risk well in control and helps MFF achieve greater returns.
Technically,the scrip has remained in bullish phase from the month of March and after making new 52 week high in the month of September, the scrip has shown some dips in the month of October and in current month of November. The scrip is trading above the middle bollinger band and there will be high chances for it take support near the levels of $2.58 of the middle band and show the upside move.
Fundamentally,the market cap of MFF was recorded at $1.43bn, with P/E of 5.78x and beta below 1x.While MFF has a well-positioned and concentrated portfolio along with sound financial health, the stock is slightly at high levels. We have a wait and watch view on the stock at the current levels of $2.61.
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