In this briefing:
1. Telstra: Earnings Under Pressure in FY19 but Move to Mobile Should Lead to Gains from FY20.
Recently, Telstra (TLS AU) reported 1H19 numbers which showed declines in revenue, EBITDA and net profit. That seems to have put the brakes on a decent share price recovery (Telstra shares had risen 14% to their recent peak YTD). And with the weak numbers, Telstra cut its interim dividend to 8cps. The result was well telegraphed to the market so did not come as a huge surprise, although Ian Martin had hoped the dividend would not be cut. Our view remains that Telstra is working to get through two years of change, with 2019 seen as the bottom for earnings. There are plenty of risks ahead and, with dividend support reduced, we have put Telstra back on a Hold recommendation with a target price of $A$3.30. The three year outlook is promising as Telstra switches the focus to mobile, delivers on its T22 strategy and works through several NBN related issues.
Telstra summary P&L – a three year view
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