Despite a 70% rise in its share price since January, an analyst believes Telkom is still undervalued – however there is a caveat.<\/p>\n
Shares in the converged telco rallied nearly 3% again trade on the JSE on Thursday (17 October), closing at R28.35, up from a low of R11.34 recorded in only May this year.<\/p>\n
Telkom added 1.8% by noon on Friday (17 October), to R28.70 giving the group a\u00a0market cap approaching R15 billion, having been almost half that only five months ago.<\/p>\n
Nick Crail, Portfolio Manager at RMB Private Bank believes that\u00a0Telkom is still undervalued.\u00a0“There has been quite a re-rating based on the new management and stronger board,” he said.<\/p>\n
“However, this momentum gain needs to be sustained. As long as Telkom continues to bring new information into the market that the market sees as favorable, the run can continue.”<\/p>\n
The fixed line\u00a0incumbent\u00a0received\u00a0a boost earlier this month when\u00a0regulator, Icasa, announced plans to cut mobile termination costs dramatically.<\/p>\n
However,\u00a0Crail said that a lot of uncertainty still shrouds the\u00a0company which might have a dramatic impact on its share price, and could lead to a sharp decline including\u00a0negative Government involvement, “or a longer term strategy that the market doesn\u2019t think will work or that costs aren\u2019t being reduced or the strategy\u00a0isn’t\u00a0being delivered on.”<\/p>\n
“For these reasons, we wouldn\u2019t be investing yet as we want more clarity and evidence that the ship has been turned around,” he said.<\/p>\n
Another analyst said that it was already too late to jump on the Telkom bandwagon for quick returns.<\/p>\n
Telkom, last week (8 October), advised that\u00a0it expects headline earnings per share and basic earnings\u00a0per share for the six months ended September 2013 to be at least 20%\u00a0higher than the corresponding period in 2012.<\/p>\n
In the interim period in 2012, Telkom announced basic earnings per share of 85.2 cents, while headline\u00a0earnings per share from continuing operations decreased by 35.5% to 191.7 cents.<\/p>\n
Telkom is\u00a0expected to publish its interim results next month (18 November 2013).<\/p>\n
Telkom expects jump in earnings<\/strong><\/a><\/p>\n Telkom executive pay shock<\/strong><\/a><\/p>\n