Stocks’ Details

TPG Telecom Limited

Market Speculation related to New Launch Plan: TPG Telecom Limited’s (ASX: TPM) stock climbed up 1.259 per cent on July 26, 2018 following the market speculation related to introduction of some refreshed plans by the company as they informed in May month i.e., six-month mobile plan at zero cost for its first customer and thereafter chargeable at A$9.99 per month for the services. This is the first kind of promotion activity in Australia and heading towards new phase for competition in the telecom industry which can benefit Australian users. The trial mobile network coverage will be available in various areas such as Sydney, Melbourne, Brisbane, CBD, Civic, Braddon, and Kingston in Canberra, etc. The management presumed that the company’s mobile network is expected to be completed by mid of 2018.


1HFY17 - 1HFY18 Underlying EBITDA Bridge (Source: Company Reports)

Besides this, the group delivered strong cash flow results in 1HFY18 with $ 417.2 Mn cash generated from operations. At the end of 1HFY18, the Group had the cash reserve of $ 1,394.3 Mn, which represents a leverage ratio of about 1.7x EBITDA and had undrawn headroom of over $ 900 Mn in its debt facilities to support its remaining mobile network investment. Considering the first half year performance, the company has upgraded its underlying EBITDA guidance which is in the range of $825-$830 Mn for the full financial year. The management anticipates achieving the upper end of the aforesaid EBITDA limit with the support of its ongoing developments such 5G services, lower rate service plan, etc. Hence, we maintain our “Buy” recommendation on the stock at the current market price of $ 5.630 by looking at the potential in long term.
 

Telstra Corporation Limited

Long-Term Player: Telstra Corporation Limited (ASX: TLS) confirms that there is no change to its capital management framework and anticipates its Capex to sales ratio in the range of 16% to 18% in FY19. Further, Capex to sales ratio over the medium term is expected to be around 14%. On the financial front, RoE stood at 11.8% in 1HFY18 which is similar to the prior corresponding period (pcp). The quick ratio and current ratio came at 0.70x and 0.82x, respectively in 1HFY18 which is below the industry median. However, we expect that the company will revamp its market share in Australia through new strategies. The group’s strategy, Telstra2022 is expected to mitigate challenges while nbn roll-out with 5G services at scale and Internet of Things will be at full throttle. The group also intends to remove the need for one-third of customer service calls within two years and two-thirds within four years, with better lead in key industry surveys for network performance. The productivity target is expected to be enhanced by a further $1 billion to $2.5 billion with monetisation planned up to $2 billion in assets over the next 24 months. Currently, the share price is trading close to 52-week low level. Hence, we maintain our “Hold” position into the stock at the current market price of $ 2.720.


Productivity Program Framework (Source: Company Reports)

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