Telstra Corporation Ltd
.JPG)
TLS Details
Capital allocation review’s outcome impacted the stock movement:Shares of Telstra Corporation Ltd (ASX: TLS) tumbled 10.6% after the company announced the outcomes of its capital allocation review on August 17, 2017. On the other hand, the company has lifted its full-year profit even in a challenging environment but declared a cut in its dividend. For FY17, Telstra has reported 4.3% year on year (yoy) growth in total income at $28.2 billion, while posting 2.0% yoy growth in EBITDA at $10.7 billion. Accordingly, Net Profit After Tax (NPAT) from continuing operations increased 1.1% to $3.9 billion. However, together with continuing and discontinuing operations, NPAT decreased 33.8% to $3.9 billion ($1.8 billion from the sale of Autohome shares was included in FY16 NPAT). During the year, TLS saw continued growth across key segments, with retail mobile net adds of 218,000, including 169,000 post-paid handheld net adds, and 132,000 domestic retail fixed broadband customers. Nbn connections grew by 676,000 to 1,176,000 bringing total market share to 52% (ex-satellite) and retail bundles continued to perform well, with 224,000 adds on the back of the popular ‘Best Bundle Ever’ and ‘Hottest Entertainment Bundle’. Moreover, Telstra reduced its underlying fixed costs by $244 million in FY17, consistent with its announcement in November 2016 to achieve at least $1 billion in productivity by FY21. Further, the company intends to bring forward previously communicated $1 billion net productivity target by one year to FY20, while increasing a further $500 million in cost savings to deliver more than $1.5 billion in net productivity by FY22.
.png)
Full year 2017 results; (Source: Company reports)
The company has announced the outcomes of its capital allocation review, commenced in November 2016. The outcomes include a potential plan to monetise a portion of locked-in recurring nbn receipts, a new dividend policy and a revised capital management framework. Revised capital management framework focused on maintaining tight fiscal discipline, maximising returns for shareholders, maintaining financial strength and retaining financial flexibility for investment in the future. Accordingly, TLS decided to reduce the pay-out ratio to 70 – 90% of Telstra’s underlying earnings and return in the order of 75% of net one-off nbn receipts to shareholders over time via fully-franked special dividends. The Board announced a fully franked final dividend of 15.5 cents per share, bringing the total dividend for the financial year to 31.0 cents per share. Combined with the $1.5 billion on and off market share buy-backs completed during the year, Telstra returned $5.2 billion to shareholders in FY17. Given the ongoing discussions with nbn co and Government on the potential monetisation of a proportion of the recurring receipts, it has suspended the Dividend Reinvestment Plan with an intent to reinstate in the future.
For FY18, Telstra expects to report revenue of $28.3 − $30.2 billion and EBITDA of $10.7 − $11.2 billion. Capital expenditure is expected to be between $4.4 - $4.8 billion or approximately 18% capex to sales and free cash flow of $4.4 − $4.9 billion. The company expects total dividends in FY18 to be 22 cents per share (fully-franked), including both ordinary and special dividends.
Stock Recommendation: Given the ongoing capital allocation plans for long-term sustainability of returns, improvement in productivity gains, and investments to increase the market share, we maintain a “Buy” recommendation on the stock at the current market price of $ 3.87
Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.