Markets Today

Once again, the market has tested the top of the range only to fail. Maybe it is time to test the bottom of the range? International markets have been spooked by US political machinations coupled with the latest atrocity in Barcelona.

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SPI was down 51. May not be that bad given the focus on results fall out. Any more below 5700 will once again provide a buying opportunity.

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TELSTRA

  • It remains all about results locally. Telstra was obviously the problem child yesterday. We all knew the dividend would be cut but the magnitude of the cut has stunned the market. Of course, the company has tried to spin it in the best way possible. Better payout ratio and setting TLS as a ‘transformation’ story. That is all well and good but TLS has been a bond proxy and yield stock for so many. It is hard then to turn the narrative into a growth tech stock given there is no growth. We now have a yield stock without an attractive yield and a growth stock without growth. This transformation in the company will cause a transformation in the share price. Very hard to get excited about this one. There will be a lot of funds and investors questioning why they are holding TLS. It is a valid question. Expect the stock to underperform. We had hoped that TLS would outline the growth strategy and change the narrative. For the better. But unfortunately, Andy Penn has failed. The great hope, if you can call it that is the 5G technology, the great draw card was the dividend. It is no more. It is deceased like the Norwegian Blue. Not a great chart either.
  • So far, the research I have seen is negative. Citi has a SELL on the stock with a price target of 400c down from 433c. The broker said that the results itself was inline but the FY18 guidance a little soft. It was not just about the dividend. Morgan Stanley has a price target of 370c and Credit Suisse 390c. Both are underperform or neutral.

Clarence

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