Forum Archive Index - July 2000

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

It was good to see the announcement of  another 'Stocktake' article.  
 Very few such announcements get me to visit the 'sharechat' 
website faster!

Frank seemed almost apologetic that given his last PRG article, the 
market has not reflected the value of Pacific Retail Group as he 
may have seen in it.    I certainly hope no-one feels sore about 
that.   It is up to everyone in this investment game to do their own 
homework.   Sure, Frank Fernandez has the experience,  no doubt does 
a little more research than most, and presents his findings in a more 
 articulate way than most of us could ever hope to do.    But that 
doesn't mean he is always going to be right, and nor should anyone 
expect that.  Besides I don't think the PRG story is over.   And  a 
5% slump in the share price in as volatile a thing as the sharemarket 
is hardly a caning.  

Personally I found the Fernandez Telstra article interesting for what 
it didn't say.

For a start there is the revival in the Vodaphone float, as Timothy 
Carling has reminded us.   That should have the Aussie fund managers 
selling TLS to make way for Vodaphone in the 'telecommunications' 
section of their portfolio.

Jim Wiseman notes that Telstra has an undergeared balance sheet, 
but this is a view that relates to the company as it is now.     The 
picture may not look so pretty if the Asian acquisition goes through.

Telstra has lost it's local loop monopoly, which I believe was 
another reason for this years share price downgrading.  It hasn't got 
that back, and isn't going to.

Then there are all those Mom and Dad investors.   I think of the 
parallel in NZ with Contact Energy.    Contact, from a shareholders 
perspective have done nothing wrong, yet their share price continues 
to languish.   As soon as it gets anywhere near the issue price 
another wave of 'Mom and Dad' investors come out of the woodwork and 
beat it back.    There is a similar situation in Australia where the 
'Moms and Dads' are facing not only a paper loss on their  Telstra B 
warrants, but a call on cash in November.     So if there is any 
short term bounce in the TLS share price there is a double 
incentive for those people to sell before then.

Lastly there is the venture into Asia, via the Hong Kong mobile 
market.  Such a deal holds the promise of a quote
"tap into the vast and seemingly bottomless and extremely lucrative 
Asian markets."
That is the hype.
The reality for most Australasian companies (can you name even one 
Australasian company that has managed to pull profits out of Asia?)  
that have been there is that Asia is a vast and seemingly bottomless 
receptacle for their cash.   Ask yourself what influence will Telstra 
will  have on Pacific Century Cyber Works with their projected 2% 
stake?

It is great to have a vision of owning 40% of a joint venture that 
will dominate the mobile phone business in Asia, but at the moment it 
is just a vision.   You can guarantee that others will have the same 
vision and there are no details at all about how much Telstra/PCCW 
will have to pay for the acquisitions to fulfil this paper plan.

To me TLS looks like a short term sell, and the current rally may be 
little more than the' buy on the rumour, sell on the fact' kind of 
share price movement that we have all seen  before in other shares.   

However, come September/October when we have had another jitter in 
the NASDAQ, the Moms and Dads start bailing out to avoid the call on 
their cash and the sentiment has once again turned against Telstra 
-that- might be the time I get out -my- cheque book.

All comments IMHO of course.

 SNOOPY
 Disclosure:  Hold TLS, not selling, but not buying either at this 
time.


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