The analysts at investment house UBS have been running the ruler over Telstra Corporation Ltd's (ASX: TLS) latest profit result and come up with a much lower valuation than previously according to reports in the Fairfax Media.
As a result of the telco's decision to take the axe to its dividends and the analysts' lower expectations for future earnings per share the telco is now valued at just $3.90 by UBS. The size of the dividend cut reportedly came as a surprise to the UBS analysts and the market in general.
Today the shares are changing hands for $3.86 on an FY 18 yield of 5.7% plus the tax effective benefits of franking credits. For investors the big question is whether Telstra will be able to deliver earnings growth off the back of its decision to reinvest more in the business from this financial year onwards.
The group also has an earnings hole to fill as a result of falling NBN Co. payments and as fixed-line home phones continue to head into the history books.
Another telco in the NBN space that's falling today is Vocus Group Ltd (ASX: VOC) after its shares got hammered on news that its private equity suitors will not be able to buy the business at $3.50 per share. Vocus shares are down 16% to $2.70, with the company guiding investors to expect low-to-mid-single digit EBITDA growth in FY18.
Forget Telstra!
