Forum Archive Index - February 2003

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

Hi winner69,
 
> 
>A lot of people see TLS as a blue chip and in difficult times a
>reasonably safe haven to put their money.
> 
>The chart Phaedrus posted would suggest otherwise.
>
>


I don't think you can judge what is a blue chip by looking at a share 
price chart.  Certainly not by looking at a chart alone.


> 
>Marketmad.com do blend fundamental views with TA very well. 
> 
>Is this (basic) fundamental view reflected in the TLS chart - I
>would say it is
> 
>Quote (from marketmad.com) -
>Blue Chip or False Hope ?
> 
>Features define a company as blue chip, not a name.
>Blue chip companies are characterized by:
> 
> 1. high growth business models
> 2. revenue growth
> 3. profit growth
> 4. proven and focused management
> 
>Many people have paid the penalty for incorrectly concluding blue
>chip status.
>  
>On the 4 tests above, Telstra scores 0 out of 4. Telstra is NOT blue
>chip.
>
>

Let's not judge those points too hastily shall we?  Let's see.  

Business Model?

Telstra builds a network covers its costs and all incremental 
customers are pure profit.   Can you explain Winner how it is 
possible to have a higher growth model than that?

Sales revenue growth?

1998: $16.7b; 1999 $17.5b; 2000 $19.3b; 2001 $18.7b; 2002 $20.2b

That looks like a very nice growth path to me.

Net Profit?

1998: $3.0b; 1999 $3.5b; 2000 $3.7b; 2001 $4.0b; 2002 $3.7b

Thats a nice upward trending profit line, made better if you realise 
the FY2001 contained $400m of one off items.

Proven and focussed management?

This one is a bit subjective, but where have Telstra moved outside 
their core telecommunications competancies?

I'm disappointed in your superficial analysis Winner.  It isn't like 
you to be wrong, but I guess if you are going to do it, perhaps it is 
best to be totally and utterly wrong on every point and get all your 
mistakes out in one go, eh?

By my reckoning Telstra passes all of those tests.  


> 
>On a worst case basis, over time, Telstra could easily halve in
>value.
> 

The dividend is 22c per share, and well covered.  This gives 
Australians a yield of 7%, based on a 30% franking credit.  Please 
explain under what 'worst case scenario' the yield will go to 14%.

>
>Given inept management, and the high risk model, it is possible.
>

Sure it is possible but given that Telstra has been the best managed 
Telco in the world to date and has the lowest risk business of any 
telco in the world it seems very unlikely.

> 
>In terms of value, the bearish conclusion is confirmed. On the basis
>of the last close, the price earnings multiple is mid teens.
>Considering that the trend for earnings is negative, mid teens is
>full.
> 

There is no negative trend.

>
>On top of all that, speculation of an earnings downgrade has been
>rife.
>

Repeat after me.  There is no negative profit trend.

One downgrade does not a negative trend make.

> 
>If above 4.72 the story might change, but until then, the outlook is
>bearish
> 

Cart before horse.  If the sharemarket closes down for a day, next 
you would have us believe Telstra will cease to operate for a day.

I suspect looking back at your post Winner, it was a troll from which 
 you wanted to extract a counter reply.  Well you got one.

But if you really think TLS is a dog I might be interested to take 
some of those other dog shares you own off you.  I'll assume 
responsibility for them, take them for walkies and look after them 
-permanently- all for you, all for a very modest fee.

Woof woof

SNOOPY



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