Blue Chip or Not?
Telstra has reported its results for the six months ended 31 December 2015.
Using a telescope rather than a microscope says this is no blue chip:
- Reported total income excluding financial income $14.2 billion
- Reported EBITDA $5.4 billion
- Net profit after tax $2.1 billion
- Earnings per share 17.2 cents
- Fully franked interim dividend of 15.5 cents
- Capital expenditure $2.1 billion
And here are the results for the same numbers for the same half, a decade ago.
Results for the six months to 31 December 2005
- Reported total income excluding financial income $11.6 billion
- Reported EBITDA $5.3 billion
- Net profit after tax $2.1 billion
- Earnings per share 17.3 cents
- Fully franked interim dividend of 20 cents
- Capital expenditure $1.81 billion
And here are the percentage changes for each item over the 10-year period. Note, these are total changes NOT per annum changes.
- Reported total income excluding financial income +22%
- Reported EBITDA +1.8%
- Net profit after tax –no change
- Earnings per share –(1/2%)
- Fully franked interim dividend of –(22.5%)
- Capital expenditure +16%
Enough said.
Ps. Does your fund manager own Telstra? Does your Individually Managed Account hold Telstra? No one has ever been sacked buying Telstra. Right? Maybe they should be.
Roger Montgomery is the founder and Chief Investment Officer of Montgomery Investment Management. To invest with Montgomery domestically and globally, find out more.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Karin Hefftner
:
We are in the process of getting rid of the rubbish in our portfolio, one of which was Telstra. At least we sold them for a profit, but sadly that will not be the case for some of the others. You don’t want to know what they are!
Tristan Harrison
:
Hi Roger, point well made.
Considering all the mergers and acquisitions that have resulted in the current TPG and Vocus entities, has most of their growth happened already? How will they grow organically where Telstra hasn’t – is it as simple as retaining much more of their profits?
Also, there’s been a lot of talk about privatizing NBN Co. What are your thoughts on it being privatized and would you be a potentially interested shareholder depending on the price?
Tristan
Roger Montgomery
:
Lower capital base and capex suggest the returns can be higher than Telstra. The question is where to profitably redeploy the retained profits. Ever increasing data usage will, to some extent, be offset by price competition, but the tide is generally rising. Note that when Telstra recently offered free data in return for its network being switched off in error, the extent of demand for data was laid bare: “5.1 million Game of Thrones episodes. 2.3 million movies. 23 million downloads of Kanye West’s new album The Life Of Pablo. They’re all about 1,841 terabytes — the same amount of free data Telstra users across the country clocked up in just one day”
Jim Hasn
:
Hi Roger
Crystal clear. They reduced the dividend so that they it was less than the EPS. There are many better options, unless you don’t care whether your share prices increase or not.
Roger Montgomery
:
Thanks Jim.
Greg McLennan
:
And my father, like so many others, would say:
“But they pay me a good fully franked dividend”.
Roger Montgomery
:
Good to hear from you Greg.