The Telstra Corporation Ltd (ASX: TLS) share price is having a rather undecided day today. After making a new 8-month high last week of $3.48, Telstra shares have been sliding ever since. The ASX's largest telco opened this morning at $3.37 after going as low as $3.36 yesterday. At the time of writing, the Telstra share price is sitting at $3.40, up 1.04% for the day, but down close to 2.5% on last week's high watermark.
So is this a buying opportunity for Telstra shares?
Telstra has been enjoying something of a renaissance for ASX investors of late. One of the catalysts for this share price recovery was the announcement last month of a new structural separation for the telco. Under the plan, Telstra will legally and regulatorily separate into four divisions by December this year. They will be InfraCo Towers, InfraCo Fixed, ServeCo and Telstra International. These divisions will house a component of Telstra's business, while all still coming under the umbrella of the Telstra Group on the ASX. Since this announcement, Telstra shares are up close to 6%.
A recent article in the Australian Financial Review (AFR) argues that this split is accretive for value. It quotes Gaurav Sodhi of Intelligent Investor, who has given Telstra a $5 share price target going forward. This is partially a result of the split, which he states will help the markets recognise that "infrastructure-style assets that can generate stable, recurring revenues, resulting in a far higher valuation than the present [Telstra] share price".
The report also asks the opinion of Will Granger of Airlie Funds Management. Mr Granger also thinks there is considerable value in the plans for a split. As an example, he notes that mobile tower companies can trade at an earnings before interest, tax, depreciation and amortisation (EBITDA) multiple between 21-27. Telstra currently trades at an EBITDA multiple of roughly 8.
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Is Telstra a buy today?
Granger and Sodhi aren't the only investors bullish on Telstra today. According to CommSec, investment bank and broker Goldman Sachs has a 'buy' rating on Telstra shares as of 26 March. Goldman's 12-month Telstra share price target is $4 a share, supported by "the potential upside in its infrastructure assets".
At the current share price, Telstra has a market capitalisation of $40.44 billion. Its dividend yield (including special dividends) is currently sitting at 4.71%, or 6.72% grossed-up with Telstra's full franking.
