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Daily ShareChat: Telstra

By Jenny Ruth

Tuesday 24th August 2010

Text too small?

Telstra Corp's guidance for earnings in the year ended June 2011 has unsettled investors, says Peter Warnes, an analyst at Aegis Equities Research.

Telstra, which also operates in New Zealand and whose shares are traded on NZX, said it expects a "high single digit percentage" decline in earnings before interest, tax, depreciation and amortisation (EBITDA) on "flattish" sales.

Its free cash flow guidance is between A$4.5 billion (NZ$5.69 billion) and A$5 billion compared with $6.2 billion in the year just gone.

"This brings the maintenance of the 28 cents annual dividend into question," Warnes says. A 28 cent dividend would cost the company A$3.48 billion.

Because the board won't like cutting the dividend, the prospect of an improvement in 2012 may see it maintain the dividend but there may be an issue on franking, he says. Franking credits will be negative A$138 million at June 30, 2011.

"2011 is a 'transition' year which will require additional investment to compete in a rapidly changing and challenging environment," Warnes says. The transition spend is aimed at consumer growth both by acquisition and retention.

"The benefits are expected to be delivered in 2012 and beyond," he says. "Chief executive David Thodey is determined to lift mobile market share at the expense of Optus."

Recommendation: Buy.

Daily ShareChat articles report how the main experts in the market might view a certain share and we provide this commentary as a useful resource for investors. Content on this site does not in any way constitute a recommendation to buy, hold or sell any particular share. Investors should always seek professional advice before making any investment decisions.

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Printable version

Get quotes for Telstra Corporation Limited Ordinary Sha (TLS)

NZX Annoucements for TLS

9 Feb 2012	INTERIM: TLS: Financial Results for the Half Year ended 31 December 2011
9 Feb 2012	HALFYR: TLS: Financial Results for the Half Year ended 31 December 2011
9 Feb 2012	ADDRESS: TLS: Half Year ended 31 December 2011 - analyst presentation
4 Jan 2012	RELINT: TLS: Amended Appendix 3Z - Final Director's Interest Notice