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What are Roger Montgomery’s thoughts on Telstra’s half yearly results?

Media Room, TV Appearances | Comments (18)

What are Roger Montgomery’s thoughts on Telstra’s half yearly results?

Following the release of Telstra’s half yearly financial results, Roger Montgomery shares his views with Ros Childs on the ABC’s Midday Report. Fast Forward to 10:50 to see Roger’s interview. Watch the interview.

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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.

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18 Comments

  1. Ron F
    :

    Hi Roger,
    Regarding the 1st half financial year 2011 reports, I am not totally sure, confused actually, if we should be using the reports to update 2011 intrinsic value or maybe also today’s intrinsic value.

    Even though I consider myself as an Undergraduate Value Investor, my own thoughts have been to use the reports as a guide only for the 2011 I.V.

    My thoughts are that comparing the 2011 first half year to the previous corresponding period can be only used as a guide because,
    1. If earnings are up this current half year it doesn’t necessarily mean the full year will be, even if management upbeat comments are in good faith, because many deriving company macros can change even in a six month period

    2. I don’t think you can simply multiply the first half year results by 2 and then use a more conservative figure, e.g. less 10% 15% etc. as there are many companies’ whose full year earnings have historically been more skewed to the first or the second half., e.g. retailers would have to be more skewed to the first half

    Getting back to my question,
    a) Do you only use the half year reports as a guide to updating the 2011 IV
    b) More importantly when assessing the margin of safety should it be from the I.V. calculated prior to the half year reports – more related to the full year FY10 reports, and also obviously taking into account since then factors that increase and decrease IVs as outlined on pages 210 & 211 of your book.

    Hopefully, I have been self explanatory and haven’t confused it even more.

    Regards Ron F

  3. Ron F
    :

    Hi Roger,
    Regarding the 1st half financial year 2011 reports, I am not totally sure, confused actually, if we should be using the reports to update 2011 intrinsic value and maybe also today’s intrinsic value

    Even though I consider myself as an Undergraduate Value Investor, my own thoughts have been to use the reports as a guide for 2011 I.V.

    My thoughts are that comparing the 2011 first half year to the previous corresponding period can be only used as a guide because,
    1a. If earnings are up this current half year it doesn’t necessarily mean the full year will be.
    1b. Even if they are up and the Chairman’s and/or the CEO’s comments are upbeat for the rest of the financial year, even if it is in good faith, it also doesn’t necessarily mean the full year will be, as many deriving company macros can change even in a six month period.
    1c. Still, you have to be careful reading the notes from management. In one report I read management’s highlights were on continuing large increases in EBITDA, with no mention of NPAT – seemingly a deflection (EBITDA over sell). After delving into the financials, the NPAT increase was insignificant due to large depreciation and amortisaion.
    2. I don’t think you can simply multiply the first half year results by 2 and then use a more conservative figure, e.g. less 10% 15% etc. as there are many companies’ whose full year earnings have historically been more skewed to the first or the second half. For an example, retailers would have to be more skewed to the first half because the Christmas trading is their largest and most important period.
    3. Finally, the last thing I wouldn’t take into account, after a Company’s half year announcement, are analyst’s confident earnings upgrades, in fact at any time during the year.

    Anyway, getting back to my question,
    a) Do you only use the half year reports as a guide to updating the 2011 IV
    b) More importantly when assessing the margin of safety should it be from the I.V. calculated prior to the half year reports – more related to the full year FY10 reports and demonstrated high ROE overtime, and also obviously taking into account since then factors that increase and decrease IVs as outlined on pages 210 & 211 of your book.

    Hopefully, I have been self explanatory and haven’t confused it even more.

    If anyone else in the room would like to comment on it feel free. I have appreciated everyone’s contribution to the site. Without sounding like I am being unthankful and disrespectful to anyone’s efforts and knowledge, I would like to say a special thank you to the Graduates who have put in an enormous effort to help the Undergraduates like myself – thoroughly enjoyed reading your individual posts, they have been very enlightening. As I stated anyone feel free to reply, if you wish.

    Regards Ron F

    • Roger Montgomery
      :

      Hi Ron F, yes it gives guidance to 2011 but more importantly it gives guidance about the quality of the business, seasonality in earnings, prospects, quality of management, insights into sensitivity etc…

      • Ron F
        :

        Thanks heaps Roger for the reply.
        It is very clear.Now, I can check my intrinsic values with confidence.
        Regards Ron F

  4. mike griffen
    :

    Hi Roger,

    great to see you on Switzer last night, you guys are just magic together as a viewer one can see how Peter casts you as one of his most popular guests.
    Not so sure about you appearing on the tabloid current affairs programs I think you are a class above that trash

    Abbot & Costello, Dean & Jerry & now Pete & Rog, keep up the great work Roger love your stuff

  5. Ron F
    :

    Hi Roger
    I originally posted this a few weeks ago. I am not after any reply of thanks. But I thought I would re post it in case I posted it in the wrong area.

    First of all a very happy New Year to you.

    Many thanks for,
    Writing the book in simple understandable layman terms – passing on an immense amount of knowledge.
    Your generosity for writing and posting on various subjects and practically giving us your I.Vs. and alerting us to investing opportunities in a number of companies. To name a few Matrix, Forges, Decmil. Myself, like many others, received a very good return on the investments.

    I have been reading the posts since approximately last August, but due to last year being a hectic one, I did not have the time to contribute to the site. Hopefully, this year I can post some worthwhile blogs.

    I cannot thank you enough for changing my previous approach in investing.
    Regards Ron F

      • Ron F
        :

        Hi Roger,
        Thanks for the reply, especially so late in the evening. As for you thanking me for the encouraging words, you thoroughly deserved it.

        I did forget to mention my overall return would not have been as high, if you hadn’t so generously altered us to the likes of Matrix, Forge and Decmil, though even without those, my return still would outperformed the all Ords thanks to your teachings.

        But that said, we shouldn’t have to expect you to give out IVs and companies like above. It is all covered by your teachings in your book. It is a matter of reading it not once, but as many times required. That is not to say your book is hard to comprehend, in fact it is the opposite.

        I’ll put the learning process in this way, when I was at school I hardly got an A grade simply because of lack of effort and application with attentiveness and studying – the same applies with anything you are learning.

        As I mention in the original blog you changed my approach to investing. In short, I started trying to learn the stock market about 18 months ago, by mainly reading analyst’s reports and investing based on their reports. It became so confusing and to point of being disillusioned – ready to give up investing in the stock market, until I subscribed to Money Magazine last year and I read your first ever article.

        When I get time Roger I will go into more detail my past experiences and why I became a believer of your investing principles. Also I’ll post my % returns on the stocks I bought versus the all Ords for each one at the time of buying the stock.

        Many thanks again Roger
        Regards Ron F

      • Ron F
        :

        Hi Roger
        Thanks for the reply.
        The encouraging words are thoroughly deserved.
        Many thanks again Roger
        Regards
        Ron F

  6. Ashley Little
    :

    Hi Roger,

    Yes it is not looking pretty,

    Fixed line stuff going to nil at some stage and mobile the most competitive market there is.

    Yet people still hold crossing their fingers and hoping that things will change.

    Devine intervention is required though as the NBN is merely the new highway to compete on

    • David V
      :

      Hi All,

      My question is whether the government will allow Telstra to continue to fall into oblivion. It wasn’t that many years ago that the government trumpeted Telstra as the stock that all mum and dad investors needed. Now those families have taken the hit for what they would perceive as ‘another broken promise’. P.S – I don’t own Telstra shares.

      I thought that the Government’s push for the NBN was another futile attempt to breath life into the corpse and keep it resuscitated for a while longer, but as noted by Ashley, it is just going to provide a new canvas for competition. I certainly feel very sorry for those individuals who took the advice of so called ‘professionals’ and bought in to Telstra. Again, many thanks to you Roger for illuminating the way through noise like this.

  7. Frank Bildos
    :

    Hi Roger,

    Could they possibly split Telstra up and therefore its parts become much more profitable or is Telstra doomed to sit there not doing much for a very long time? Surely it can’t keep operating the way it is now!

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