Telstra Corporation Limited (ASX: TLS)
TLS lately revised its FY 2019 guidance in view of the nbn rollout and migration in FY 2019 that is now in line with management’s estimates and may be updated for any material changes, including after taking account of the nbn Corporate Plan 2019. The nbn Corporate Plan 2019 includes lower than previously estimated premises declared Ready for Service (RFS) and premises activated for FY 2019.
Improved Financials:Approximately 10.7% rise to $8606m under net cash provided by operating activities was reported in FY18, and the increase was mainly due to an increase in one-off nbn receipts. 34.3% of the free cashflow generated from operating and investing activities up to $4,695 million, represented an increase of $1,199 million in FY18. This was largely due to an increase in net cash provided by operating activities resulting from a $613 million increase in receipts from customers. Further, a 5.2% decline in gross debt up to $850 million in FY18 was noted primarily from the repayment of $1,791 million in debt. Strong balance sheet with net assets of $15,014 million was reported in FY18. The volume of data moving across TLS fixed and mobile networks is expected to increase by 50 per cent per annum and the range of services supported by its networks is expected to increase significantly. NPAT was down 8.43% to $3,563m. TLS has however, increased their net cost productivity target to $2.5 billion by the end of FY22 and expects to achieve more than $1.5 billion of their cost productivity target by the end of FY20. TLS intends to monetize up to $2 billion in assets over the next two years to strengthen the balance sheet, and it expects to incur additional restructuring costs of approximately $600 million in FY19.
Technically,the scrip is experiencing the bullish phase from the past few months with small retracement noticed during the month of October. At current scenario, the scrip is trading well above the middle bollinger band, with major indicators like Relative strength index (RSI) and Moving Average Convergence indicator consolidating in positive territory.
The market cap of TLS was recorded at $36.39bn, with P/E of 10.2x, and beta below 1 x as on November 7, 2018. At current juncture, the scrip is trading at the price levels of $3.090. Improved financial performance with focus on margin improvements and prevailing trading levels look interesting. We give a “Buy” recommendation on the scrip at the current price levels of $3.090.
Vocus Group Limited (ASX: VOC)
Improving portfolio with market presence:VOC owns an extensive national infrastructure network of metro and back haul fiber that connects all capital cities and most regional centres across Australia and New Zealand. VOCUS holds a strong portfolio of brands that targets the enterprise, small business, government and residential market segments across Australia and New Zealand. The company also has its operations in the wholesale markets providing high performance and scalable communication solutions that allow service providers to quickly deploy new services for their customer base. Meanwhile, 11% increase in adjusted proforma revenue up to $56.7m was recorded during FY18. This increase in revenue was driven by the introduction of new account management program that is used to provide churn stabilization. Growth was underpinned by the shift in the product mix, better cost control and disciplined pricing approach.
Technically,the scrip is trading near the upper zone of the bollinger band. At current juncture the scrip is trading at the levels of $3.51, this is the same level as reported as day high in 2017. The formation of double top can occur at this juncture and the scrip might show slight dip from the resistance level over $3.51. At current levels the scrip looks good to watch for till it breaches the levels over $3.51.
The Company aims to maximize the growth within its core Enterprise, Government & Wholesale markets in Australia and New Zealand, by leveraging these fiber and network assets. The company expects to double the revenue from these businesses in Australia and New Zealand within a span of 5 years.
The market cap of VOC was recorded at $2.18bn, with P/E of 35.78x, and beta below 1x as on November 7, 2018. At current juncture the scrip is trading at the price levels of $3.51. Shift in the product mix along with the strong network presence and trading near the resistance levels as per the technical charts, exhibit a “Hold” scenario at the current price levels of $3.51.
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Comparative Stock Price and Dividend per Share (Source: Thomson Reuters)
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