Time to buy Telkom shares?
Analysts have poured cold water on a resurgent Telkom, for now, despite recent gains in the group’s share price and the general upswing in sentiment since the appointment of CEO, Sipho Maseko.
Shares in Telkom climbed 59 cents, or 2.5%, to R23.80 in trade on the JSE on Wednesday (25 September), taking it to its highest levels since May 2012.
The telco’s share price has gained R6.87 or 40.58% in the year to date period, lifting its market cap to R12.4 billion. It hit its lowest trade of R11.93 in early May.
According to Nadim Mohamed, investment analyst and partner at First Avenue Investment Management, the company’s new board and executive team have to be complimented for injecting a much-needed fresh perspective into Telkom.
“The recent run in the share price (90% since May) demonstrates the increasing confidence that the market has in a Telkom turnaround,” he said.
However, the analyst said he would recommend waiting a bit for more clarity on certain issues which will have a major (positive or negative) impact on the business .
“This includes: scale of voluntary retrenchments, degree of self-provisioning by mobile operators, possible reduction of Telkom Mobile capex, impact of recent pricing revisions and execution of the NGN strategy.”
Mohamed said that some of these positives have already been priced into the stock, “and require more clarity before assessing the potential for any future upside”.
Another analyst said that he was weary of investing in any company with excessive government control of its strategic processes.
Government holds a 39.7% direct stake in Telkom and an additional 10.6% indirect interest though the state-owned Public Investment Corporation (PIC).
Irnest Kaplan, MD of Kaplan Equity Analysts maintains there are still too many uncertainties in Telkom to start getting carried away, while others have said they want to see an improvement in financial results before investing.
In June, Telkom reported a 73.2% decline in headline earnings per share to 87.0 cents in results for the year ended March 2013.
Group operating revenue decreased by 1.7% to R32.501 billion (2012: R33.079 billion).
The decrease, Telkom said, was mainly due to lower fixed-line voice revenue, partially offset by an increase in mobile and data revenue.
Telkom’s board also took the decision to impair the carrying value of the assets of the group by R12 billion for the year ended 31 March 2013, giving the group a net asset value is R34 per share.
In March, Telkom appointed Sipho Maseko as its new group chief executive, and Brian Armstrong as its chief operating officer. The group also appointed new board members in December.
Last week, Maseko said that both Vodacom and MTN have “unfairly benefited” from Telkom-subsidised termination rates, adding that the time had come to end it.
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