Telstra regains some ground after week of share price weakness
2001-06-24
Telstra Week
ASX Codes: tls
By Alan Wood
SYDNEY, June 22 AAP - Telstra Corp Ltd shares recovered some
ground today after more than a week of downside on the back of a
surprise profit warning.
Some analysts are now looking at Telstra's solid prospects and
expect further share price gains ahead.
Analysts said that while there will be some concerns about the
stock in the lead-up to a federal election later this year, Telstra
remained well positioned given ongoing consolidation in the
telecommunications sector.
There were some concerns about joint ventures Telstra had in
Asia with with partner Pacific Century CyberWorks Ltd, but any
negatives from those ventures should not impact too much on
Australia's largest telco, analysts said.
A flight to quality in the telecommunications sector has already
helped the stock off its lows.
Telstra was today again among the Australian Stock Exchange's
top traded stocks by volume, following the high volume trend since
its profit warning on June 12.
Telstra closed at $5.61, up 19 cents or 3.5 per cent, with 20.45
million shares worth $113.1 million changing hands.
The stock recovered some ground after hitting a three-year
intraday low of $5.36 earlier this week.
But even at today's price, Telstra shares have fallen some 24.2
per cent from the $7.40 many investors paid for them during the
federal government's sale of a second tranche of Telstra shares in
1999.
That means that someone who bought a block of shares worth $500,
for example, in that sale would now have a parcel worth around
$379, a loss of $121.
The stock's general weakness followed its profit warning earlier
this month, when Telstra said its 2000/01 revenue growth would slow
to about three per cent and earnings before interest and tax (EBIT)
to approximately five per cent.
The figures were well below analysts forecasts.
Prior to the warning Telstra shares were trading above $6.70.
Telstra itself would not comment on where it saw the share price
ahead.
But chief executive officer Ziggy Switkowski has said that the
outlook is positive beyond the current year, given that there will
be one less player in the market following the collapse of the
Packer and Murdoch-backed telecommunications venture, One.Tel Ltd.
Southern Cross Equities analyst Trevor Cain said his firm had a
buy recommendation on Telstra given the current "very attractive"
price.
"A lot of the profit downgrade has (already) come through (on
the share price) which has certainly shocked the market," Mr Cain
said.
"Given the collapse of One.Tel, we think that what has come out
of that to a degree is a flight to quality - we think that
reinforces Telstra's position very strongly."
UBS Warburg analyst Paul Richardson has also recommended the
stock, after the sell down to the current levels.
"We're actually recommending that people have a look at it
again, and buy to accumulate it so that's against the herd (of
analysts)".
Analysts and brokers said Telstra had this week also been hit by
end of financial year "tax loss selling", with investors taking
advantage of share price weakness to help write off tax losses.
Another analyst said Telstra shares would remain volatile in the
short term given the view by overseas institutions that the stock
was relatively expensive compared to other telcos, although it
remained attractive to Australian retail investors.
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