Question: Is Telstra buy or sell?
Answer (Paul Rickard): I think Telstra is more a buy than a sell.
The market was a touch disappointed with its result. Although it met its tight guidance forecasts, it was at the lower end – with earnings before interest, taxes depreciation and amortization up only 1.7%. The result for mobiles was also a little disappointing.
Telstra is going to be a low beta stock. This means it won’t go down much if the market falls, and it will lag in any rally. The stock is now definitely in the defensive category.
Question: With an ageing population, what about aged health care facilities, like Estia Health?
Answer (Paul Rickard): This is a pretty regulated sector. I understand the roll-up strategy of Estia. I also don’t quite see some of the tailwinds other analysts see for the business. How will they improve margin?
According to FN Arena, brokers are positive – consensus target price of $7.04, FY 16 multiple of 19.4 and FY17 of 16.0.
The stock is certainly a little cheaper now than it was a few months’ back.
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