Collected Wisdom

This week we look at Tabcorp, Telstra, BT Investment Management and Newcrest Mining.

Summary: Tabcorp’s quarterly numbers were not up to expectations, although it was always going to be a tougher quarter. Telstra has flagged a potential investment in the Philippines, BT Investment Management’s results beat consensus expectations and analysts say Newcrest Mining will have to step up production in the second half of the year to keep up with guidance.

Key take-out: Tabcorp’s revenue growth was slower than anticipated due to heightened competition but analysts positive on the stock say the upcoming federal wagering review could soften regulations.

Key beneficiaries: General investors. Category: Shares.

This is an edited summary of the Australian investment press: It includes investment newsletters, major daily newspapers and broker reports. The recommendations offered represent the views published in the other publications and may not represent those of Eureka Report. This article is general advice only which has been prepared without taking into account your objectives, financial situation or needs. Before acting on it you should consider its appropriateness, having regard to your objectives, financial situation and needs.

Tabcorp Holdings Ltd (TAH)

Tabcorp announced its quarterly numbers last week (October 29) and they were not up to analyst expectations. Revenue growth of only 1.1 per cent on the previous corresponding period was disappointing. Saying this analysts concede it was always going to be a tougher quarter as the benefits of the Soccer World Cup drop off.

Heightened competition has also been cited for the slower than anticipated revenue growth. Those positive on the gaming and sports betting company have pointed towards the upcoming federal wagering review to have a potential to soften regulations.

Analysts are evenly divided with two buys, two holds and two sell calls for TAH. The average 12-month price target is $4.82. Those most positive are at $5.70 with the most negative at $4.29.

  • Investors are generally advised to hold Tabcorp at current levels.

Telstra Corporation (TLS)

On Thursday (October 29) it was Telstra’s turn to get out the coffee urn and Monte Carlos as the telco held its annual investor day. The main point of interest analysts took away from the day was the ever increasing competition in the mobile and broadband space. Analysts have maintained their single digit growth expectations due to this.

Another key point of interest was the flagging of potential investment in a joint venture in the Philippines to the tune of $US1 billion. This has not concerned analysts as they all agreed this is well within Telstra’s capacity.

All but two analysts maintained their price targets with the two exceptions reducing theirs. The average 12-month target is $5.93, with the bearish case set at $4.70 and the bullish at $6.60. At the time of writing the share price sat at $5.35.

  • Investors are generally advised to hold Telstra at current levels.

BT Investment Management (BTT)

BT released results on October 29 with another strong year. Funds under management (FUM) were up as of September 30 to $78.4bn. This is up $12bn from the previous corresponding period. Pleasingly base management fee revenue also increased by 28 per cent while performance fees were substantially softer than the previous year, down to $51.9 million from $121.8m. 

BT’s result beat consensus expectations and analysts also pointed positively towards gains being made in the US. BT’s US equities funds grew by a further $3.3bn in net inflows which is a step in the right direction towards opening up a great opportunity.

Analysts, who are all pleased with the result, outlook and diversification within the business are divided in their views. Out of nine surveyed four had a buy call, four said hold and one outlier with a sell. The analyst with the sell call did raise their price target to $9.75 however it is still a distance from the current share price of $11.87.

The 12-month average price target is $11.57. The outlier on the upside has their price target at $14.50.

Given the range of price targets, with continued share price strength you could project some of the calls being downgraded to holds based on valuation if there is no further increase to guidance.

  • The consensus view on BT Investment Management is split between a buy and a hold.

Newcrest Mining (NCM)

It looks like it’s further strife for the volatile gold company Newcrest with the discovery of further issues with the concentrator 1 SAG mill at the Cadia mine. Previously highlighted in Newcrest’s September quarterly update, more loose windings have been found. The mill will remain offline for at least five weeks. The concentrator 2 SAG mill remains in operation at full capacity.

Analysts say production in the second half of the year will have to step up for NCM to keep up with guidance. This leaves no room for further setbacks. While Newcrest says it is too early to tell the impact, analysts have already speculated the loss in productivity to come in at approximately 1mt.

The miner’s share price has been on a sharp decline from the recent high of $15.79 just a few short weeks ago and now sits at $12.04. The average 12-month price target is $13.72 with the bearish case set at $10.92 and the bullish at $15.30.

The consensus breakdown sees two analysts with a buy, two with a hold and three with sells.

  • Investors are generally advised to sell Newcrest Mining at current levels.