Is Telstra still a good Investment? (17/02/2015)

11 Comments

1. 

   Greg McLennan
   February 20, 2015 at 6:00 pm:

   G’day Roger,

   I’m not a shareholder, so I haven’t spent a lot of time going through it, but on the surface, I was a bit disappointed with IFM’s result, and the way they portrayed it. Below the big heading of double digit and 22% growth, this bit stuck out:

   “The Company’s NPAT exceeded previously advised guidance by $0.3m. The achievement of NPAT beyond guidance is attributed to sales growth combined with tight cost control and a small benefit from a weaker Australian dollar compared with that used for guidance.”

   In other words, their guidance was based on the expectation of a depreciating AUD rather than improving business performance, or possibly, they initially thought the business would do better but it didn’t and the declining AUD luckily made up for it. Their comment that the better than expected profit was due in part to increased sales revenue rings hollow when NPAT in constant currency was down 3%.

   Maybe there’s more to it, but that’s how it looked to me at first glance.

2. 

   Jane Cecil
   February 18, 2015 at 10:10 pm:

   Search for yield is perfectly fine in a low interest rate economic climate. Telstra does look expensive but who wants a paltry return from a term deposit when you can buy Telstra & the banks. Can still lose money with high yielding stocks if the price depreciates sharply.
   What stocks should we be buying in case the federal reserve raises rates in a couple of months? Will these high yielding stocks be still in demand?

   • 

     Roger Montgomery
     February 19, 2015 at 10:51 pm:

     That IS the question Jane. History suggests stocks survive the first few rate rises. AFter that the outlook becomes somewhat less attractive. Of course the past is not a reliable guide to the future!

3. 

   matthew russo
   February 17, 2015 at 7:45 pm:

   Hi Team

   Not sure where to post this question but would you guys mind writing up a blog post on CGF and SEK.

   Pretty disappointed with seeks numbers although I have yet to look at them in great detail. Didnt mind CGF result, still believe this is a much longer term story to play out, as is Seek.

   Cheers

   • 

     Roger Montgomery
     February 18, 2015 at 12:09 am:

     We are going through SEK at the moment. Market reaction seemed worse than result. Underlying profit was up circa 9% to a new record and Zhaopin looks subjectively/relatively undervalued compared to LNKD for example (4 time rev versus 14 times rev). if the company misses market expectations, is that the company’s fault or the analysts’? Agree with you on CGF at this stage.

     • 

       Kelvin Ng
       February 18, 2015 at 12:50 am:

       Hi Roger, with the CGF result, it seems to be that, unless I’m missing something, to the extent its Statutory NPAT is relevant, if its suffering a -$31m investment experience from its fixed income portfolio due to credit spread expansion at this point in the interest rate cycle, wait till the bond bubble really bursts!
       Kelvin

     • 

       Kelvin Ng
       February 18, 2015 at 1:26 am:

       Hi Roger, with Sek, I just don’t understand – why does a NPAT growth of 9% justify a P/E of around 30?
       Thanks a lot.
       Kelvin

     • 

       Roger Montgomery
       February 19, 2015 at 10:55 pm:

       There is more to the business than the growth rates of the current business. High double digit growth of smaller but growing operations overseas…

     • 

       Kelvin Ng
       February 19, 2015 at 11:20 pm:

       Hi Roger, thanks.
       Can you comment on the concern I have about CGF in my post above? Thanks.
       Kelvin

4. 

   Wayne A
   February 17, 2015 at 11:57 am:

   I feel like a dummy. Not predicting the worldwide financial repression ahead, and convinced they did not represent a worthwhile investment, I sold out not far from the bottom. Of course what I also didn’t know at that time was that taxpayers would be forking out a fortune to effectively de-privatise some of the least lucrative parts of the company to form the backbone of the NBN, which may well itself be sold off some day.

   Ever since, and some analysts have stated this explicitly, Telstra shares have been priced like a bulletproof bond, and reacted accordingly as interest rates fell. We don’t need three guesses to surmise what will happen should interest rates rise…

   • 

     Roger Montgomery
     February 17, 2015 at 4:13 pm:

     Like the hula-hoop all fads, by definition, end.