機會轉(zhuǎn)換：買入Telstra持有Vocus

1、Deutsche Bank ResearchAustralasiaAustraliaTelecomIndustryAustralia TelecomsDate7 February 2019Initiation of CoverageThe transformation opportunity: InitiateTelstra Buy, Vocus HoldIndustry under transformation. Does this present an opportunity?The Australian telco industry is currently undergoing tra

2、nsformation in both the xed line and mobile segments. Further, industry consolidation is currently underway, which has the potential to change the competitive landscape. We look for opportunities through the transition, noting both Telstra and Vocus have signicantly underperformed over recent years

3、with TLS achieving-6%/-55%/-63% price performance over the last 1/3/5 years relative to the broader industrials accumulation index, while VOC performed +7%/-82%/-43%. In this initiation note, we explore the sector opportunities, and the current themes and challenges facing the industry.Telstra initi

4、ate with Buy. Attractive valuation and yield supported by solid FCF Despite the ongoing cost and market challenges, on a fundamental basis we forecast 23% total return, backed by a fully-franked dividend yield of 5.4%, FCFyield of 13%, relatively conservative gearing of 1.6x EBITDA, and an aggressiv

5、e cost out program. Telstras depressed valuation is due to it facing falling ARPU in both its Mobile and Fixed divisions, while subscriber numbers are pressured. In this report, we focus on the sustainability of the dividend and valuation support, noting cash ow is forecast to exceed earnings throug

6、hout the forecast period, leading to the potential for capital returns as gearing falls below target range from FY20 onwards. Valuation wise, TLS is trading in line with its historical average P/ E, and at a slight discount to its international peers on an EV/EBITDA basis. We initiate coverage on Te

7、lstra with a Buy rating, and a price target of $3.70/share.Vocus initiate with Hold. A company with big growth targets. Awaiting turnaroundVocus is a company in turnaround. While we do not rule out the success or otherwise of achieving its ambitious growth targets, were concerned the market has run

8、ahead of a successful turnaround with little in the way of evidence. We take comfort in the initial work done by the company in replacing senior management, investing in sales capability, and delivering the ASC cable, however in the context of the current 17x FY19E PE multiple, were happy to wait ou

9、t the rst 10-20% potential share price upside should management put some runs on the board in the company periods. From a forward PE perspective, Vocus is trading at a 14% premium to its historical average, and a 20% premium to the market, implying the market continues to price in a growth premium,

10、despite the outlook for earnings decline in FY19. We initiate coverage on Vocus with a Hold rating, and a price target of $3.10/share, implying a 12 month TSR of -7%. HYPERLINK mailto:anthony.el-khoury Anthony El-Khoury Research Analyst+61-2-8258-1679 HYPERLINK mailto:liken Peter Milliken, CFA Resea

11、rch Analyst+852-2203 6190Top picksTelstra Corporation (TLS.AX),AUD3.16BuySource: Deutsche BankCompanies featured Telstra Corporation (TLS.AX),AUD3.16Buy2018A 2019E 2020EP/E (x)10.414.412.9Div yield (%)6.75.05.8Price/book (x)2.12.62.4Vocus Communications (VOC.AX),AUD3.39Hold2018A 2019E 2020E P/E (x)1

12、3.518.615.9 Div yield (%)0.00.00.0Price/book (x)0.60.90.9Source: Deutsche BankDeutsche Bank AG/SydneyDistributed on: 07/02/2019 05:30:14 GMTAustralia TelecomsDeutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the rm may ha

13、ve a conict of interest that could aect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 091/04/2018.7T2se3r0Ot6kwoPaThe digital transformation

14、opportunityOur Asia-Pac sector head, Peter Milliken, highlights that while growing beyond legacy connectivity revenues will be a slow process (as in the case of Telstra & Vocus), he expects stocks to move ahead of earnings, as investors start to get excited that telcos are becoming less about legacy

15、 decline, and more about a broader opportunity set as enterprises go digital, which may lead to investors paying high multiples for telcos.Mobile - is 5G being over-hyped? Focus on near-term headwinds for Telstra While we expect Telstra to be better placed relative to peers with regards to its 5G ne

16、twork oering, we believe mainstream adoption is some way o. Near-term,in a highly competitive market, Telstra is challenged with convincing customers to stay with the network in advance of mainstream adoption. In our view, Telstra retains an edge over competitors with regards to 5G given the forward

17、 compatibility of network infrastructure. As such, cost savings made through ease of upgrade is able to be passed on to customers. We focus on near-term challenges, however, where we highlight in FY19, we expect a 6% decline in Telstras Mobile revenues (ex Hardware). We expect market conditions to r

18、emain challenging in the near-term with sustained pressure from competitor networks.Valuation and risksOur TLS target price is $3.70/share, while our VOC target price is $3.10/share. Both are derived from the equally-weighted average of DCF, SOTP and PE-based methodologies.For Telstra, the key downs

19、ide risks relate to the level of mobile market share losses and competitive pressures on ARPU, NBN related share loss, DPS sustainability, and success of cost out program.For Vocus, the key downside risks include; growth targets not being achieved, competition driving down ARPUs or market share. Key

20、 upside risks include; strong growth in the Corporate market leading to market share gains and/or margin expansion, strong utilization of the ASC project. Table Of Contents HYPERLINK l _bookmark0 Executive summary HYPERLINK l _bookmark0 5 HYPERLINK l _bookmark1 Telstra - Buy recommendation HYPERLINK

21、 l _bookmark1 5 HYPERLINK l _bookmark2 Vocus - Hold recommendation HYPERLINK l _bookmark2 6 HYPERLINK l _bookmark3 Telstra Financials HYPERLINK l _bookmark3 9 HYPERLINK l _bookmark4 Revenues HYPERLINK l _bookmark4 9 HYPERLINK l _bookmark5 Mobile HYPERLINK l _bookmark5 10 HYPERLINK l _bookmark6 Fixed

22、 Line HYPERLINK l _bookmark6 14 HYPERLINK l _bookmark7 Data & IP HYPERLINK l _bookmark7 16 HYPERLINK l _bookmark8 Network Application & Services HYPERLINK l _bookmark8 16 HYPERLINK l _bookmark9 Global Connectivity HYPERLINK l _bookmark9 16 HYPERLINK l _bookmark10 Telstra Expenses & Margins HYPERLINK

23、 l _bookmark10 17 HYPERLINK l _bookmark11 Summary HYPERLINK l _bookmark11 17 HYPERLINK l _bookmark12 Operating cost analysis HYPERLINK l _bookmark12 19 HYPERLINK l _bookmark13 Telstra Cashows HYPERLINK l _bookmark13 23 HYPERLINK l _bookmark14 Strong Free Cash Flow generation to continue HYPERLINK l

24、_bookmark14 23 HYPERLINK l _bookmark15 Capex outlook improving post 5G HYPERLINK l _bookmark15 24 HYPERLINK l _bookmark16 Telstra Balance Sheet HYPERLINK l _bookmark16 25 HYPERLINK l _bookmark17 Telstra Interims HYPERLINK l _bookmark17 27 HYPERLINK l _bookmark18 1H19 Group Financials (half year) HYP

25、ERLINK l _bookmark18 27 HYPERLINK l _bookmark19 1H19 Divisional Financials (half year) HYPERLINK l _bookmark19 28 HYPERLINK l _bookmark20 Telstra Valuation & Risks HYPERLINK l _bookmark20 29 HYPERLINK l _bookmark21 Valuation HYPERLINK l _bookmark21 29 HYPERLINK l _bookmark22 Risks HYPERLINK l _bookm

26、ark22 31 HYPERLINK l _bookmark23 Vocus Financials HYPERLINK l _bookmark23 34 HYPERLINK l _bookmark24 Revenue HYPERLINK l _bookmark24 34 HYPERLINK l _bookmark25 Vocus Expenses & Margins HYPERLINK l _bookmark25 37 HYPERLINK l _bookmark26 Vocus Cashows HYPERLINK l _bookmark26 38 HYPERLINK l _bookmark27

27、 Vocus Balance Sheet HYPERLINK l _bookmark27 39 HYPERLINK l _bookmark28 Vocus Interims HYPERLINK l _bookmark28 40 HYPERLINK l _bookmark29 1H19 Group Financials (half year) HYPERLINK l _bookmark29 40 HYPERLINK l _bookmark30 Vocus Valuation & Risks HYPERLINK l _bookmark30 41 HYPERLINK l _bookmark31 Va

28、luation HYPERLINK l _bookmark31 41 HYPERLINK l _bookmark32 Risks HYPERLINK l _bookmark32 42 HYPERLINK l _bookmark33 Asia-Pac Telco 2019 Outlook - Embracing the digita HYPERLINK l _bookmark33 43 HYPERLINK l _bookmark34 Key themes for 2018 HYPERLINK l _bookmark34 43 HYPERLINK l _bookmark35 Theme 1: He

29、adwinds abate HYPERLINK l _bookmark35 44 HYPERLINK l _bookmark36 Theme 2: Restoring prot HYPERLINK l _bookmark36 45 HYPERLINK l _bookmark37 Theme 3: Digital gets hot HYPERLINK l _bookmark37 48 HYPERLINK l _bookmark38 Valuation reasonable HYPERLINK l _bookmark38 50 HYPERLINK l _bookmark39 Summary HYP

30、ERLINK l _bookmark39 51 HYPERLINK l _bookmark40 5G revolution HYPERLINK l _bookmark40 52 HYPERLINK l _bookmark41 Key takeaways from CES HYPERLINK l _bookmark41 53Table Of Contents HYPERLINK l _bookmark42 Appendix A: Telstra Key Personnel HYPERLINK l _bookmark42 56 HYPERLINK l _bookmark43 Senior Mana

31、gement HYPERLINK l _bookmark43 56 HYPERLINK l _bookmark44 Board of Directors HYPERLINK l _bookmark44 60 HYPERLINK l _bookmark45 Appendix B: Vocus Key Personnel HYPERLINK l _bookmark45 63 HYPERLINK l _bookmark46 Senior Management HYPERLINK l _bookmark46 63 HYPERLINK l _bookmark47 Board of Directors H

32、YPERLINK l _bookmark47 64Executive summaryWe initiate coverage with a Buy recommendation on Telstra and a Hold recommendation on Vocus.Telstra - Buy recommendation:We initiate coverage on Telstra with a Buy rating and a Target Price of$3.70/share.Telstra provides an attractive fully-franked dividend

33、 yield of 5.4%, strong valuation support with 12m TSR of 23%, FCF yield of 13%, and relatively conservative gearing of 1.6x.TLS is trading in line with its historical average, and a slight discount to international peers on an EV/EBITDA basis.Key downside risks relate to the level of mobile market s

34、hare losses and competitive pressures on ARPU, NBN-related share loss, DPS sustainability, and success of the cost out program.Figure 1: Telstra 12 month rolling forward PEFigure 2: Telstra 12 month rolling forward PE vs. ASX Industrials20181614 121086Jul10Jul11Jul12Jul13Jul14Jul15Jul16Jul17Jul18 TL

35、S PE (12m Fwd, Bberg. cons. EPS)Average +1 StDev1.31.1 0.90.70.5Jul10Jul11Jul12Jul13Jul14Jul15Jul16Jul17Jul18 TLS PE Rel. (12m Fwd, Bberg. cons. EPS)Average +1 StDevSource: Bloomberg Finance LPSource: Bloomberg Finance LPVocus - Hold recommendationWe initiate coverage on Vocus with a Hold rating and

36、 a Target Price of$3.10/share.While we do not rule out the success or otherwise of achieving its ambitious growth targets, were concerned the market has run ahead of a successful turnaround with little in the way of evidence.Vocus is trading at a 14% premium to its historical average, and a 20% prem

37、ium to the market, implying the market continues to price in a growth premium, despite the outlook for earnings decline in FY19.Figure 3: Vocus 12 month rolling forward PE2624222018161412 1086Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Dec17 Dec18 VOC PE (12m Fwd, Bberg. cons. EPS)Average +1 StDevKey

38、downside risks include; growth targets not being achieved, competition driving down ARPUs or market share. Key upside risks include; strong growth in the Corporate market leading to market share gains and/or margin expansion, strong utilization of the ASC project.Figure 4: Vocus 12 month rolling for

39、ward PE vs. ASX Industrials1.91.71.51.31.10.90.70.5Dec10 Dec11 Dec12 Dec13 Dec14Dec15Dec16 Dec17 Dec18 VOC PE Rel. (12mFwd, Bberg. cons. EPS)Average +1 StDevSource: Bloomberg Finance LPSource: Bloomberg Finance LPRatingBuyAustralasia AustraliaCompanyTelstra CorporationReutersBloombergTLS.AXTLS AUAnt

40、hony El-Khoury Research Analyst+61-2-8258-1679 HYPERLINK mailto:anthony.el-khoury anthony.el-khouryPrice at 5 Feb 20193.13Price target - 12mth3.7052 week range (AUD)3.33 - 2.53ALL ORDINARIES6,066Price/price relativeAttractive valuation and yield supportedby solid FCF. Initiate with Buy6Simplication

41、strategy to oset the painful NBN transition4Across the industry, there is a painful transition underway as xed data providers2become NBN resellers. Telstra is not immune. Among other things, two factorsJul 17Jan 18Jul 18Jan 19Telstra Corporation ALL ORDINARIES (Rebased)work in Telstras favour, howev

42、er; 1) it has a strong wireless network which has the potential to compete with NBN in populous areas, 2) it has initiated an aggressivesimplication strategy focused mainly on increasing labour eciency throughPerformance1m3m12mdigital transformation and network investment. The simplication strategy

43、named T22 will target net xed-cost savings of $2.5bn by FY22. On our estimates, we (%) Absolute9.34.3-6.6believe approx 70% of this cost-out target is achievable.ALLORDINARIES6.92.21.7Source: Deutsche BankTelstra expects its xed-cost reduction target will oset its increasing variable costs (NBN netw

44、ork payments & COGS), leading to at or declining total costs from its 1H18 guidance basis ($18.3bn). We note that prior cost-out initiatives have been met with challenges, with gains largely oset by cost ination and growth initiatives/new businesses costs. Importantly, despite our base-case view tha

45、t Telstra will be challenged to achieve its $2.5bn target in full, we nd valuation support in our DCF of $4.00/shr, noting on a best-case scenario of achieving the full cost-out target we see 18% upside to our DCF.Is 5G being over hyped? Near-term Mobile competition should be the focusIn FY19, we ex

46、pect a 6% decline in Mobile revenues (ex Hardware). Further out, we forecast mobile revenue growth of 3% pa from FY21 driven by 5G and IoT growth (M2M revenue +37% CAGR, 17% of ex-hardware sales at FY25). We expect to see 1% decline in Postpaid and Prepaid subscribers in FY19, while ARPU is also pre

47、ssured in the short-term due to the removal of excess data usage charges ($500m impact). We expect market conditions to remain challenging in the near-term with sustained pressure from competitors improved networks, more generous bundled and out of bundle oerings, and a growing shift towards lower-c

48、ost SIM-only plans. While Telstra is better placed relative to peers with its 5G network oering, we believe mainstream adoption is some way o (FY21). Near-term, in a highly competitive market, Telstra is challenged with convincing customers to stay with the network through the churn event 5G adoptio

49、n creates.Post NBN ROIC10% achievable?We note historically Telstra has averaged 15% ROIC over the last 5 years. This compares to its WACC of 8%. In FY19, however, we expect ROIC to fall back to 8.4%. Further out, Telstra is targeting a post-NBN ROIC of 10%. At present, we estimate ROIC will climb ov

50、er 10% in FY20, before falling to 8.5% in FY22 post the completion of NBN one-o payments. While we do not expect Telstra toKey indicators (FY1)ROE (%)18.0ROA (%)10.3Net debt/equity (%)109.4 Book value/share (AUD)1.22 Price/book (x)2.6Net interest cover (x)7.7EBIT margin (%)16.7Source: Deutsche Bankr

51、eturn to its historical levels of 15%, we take comfort in Telstras eorts to return ROIC to 10%.Can Telstra sustain its dividend payments?Despite the earnings headwinds and expected ongoing capital expenditure requirements, Telstra remains in a strong position to maintain its current payout ratio, wh

52、ere we estimate the company will return to 90% payout by FY21. On our forecasts TLS will generate a cumulative $21bn of free cash ow in the next 5 years and will have over $6.5bn of surplus capital after dividends and interest payments are made, which equates to a cumulative 54c per share by FY23 av

53、ailable to shareholders in the form of special dividends and/or share buybacks.InfraCo. Good for optionality in the event of NBN privatisationIn our view, separating out Telstras xed line infrastructure assets provides optionality in the event NBN ever gets privatised. Short of NBN being privatised

54、though, were unconvinced a potential split-out leads to value creation given doubling up of corporate costs. Wed highlight xed line infrastructure owners can trade at a signicant premium to telco operators by up to +10 x EV/EBITDA points. Nearest comp, Spark (Hold; NZ$ 4.09 - EV/EBITDA 8.0 x 1yr fwd

55、) and Chorus (Hold; NZ$4.93 - 6.5x) dont follow that pattern; however, but we note Chorus still trades 30% above our 5.0 x multiple used to value Telstras Fixed Line business in our SOTP. A separation may see a multiple re-rate; however, pending further detailed disclosure from Telstra, were not yet

56、 convinced the valuation uptick warrants a spin-out should a NBN privatisation not materialise.TP $3.70/share, key risk further mobile market competition and cost out performanceOur target price is $3.70/share, derived from the equally weighted average of DCD, SOTP and PE based methodologies. Our DC

57、F uses a WACC of 7.99% (ke 9.80%, D/EV 30%, TV g=1.5%). Our SOTP valuation applies relevant multiples to the companys various businesses. Our PE valuation is based on applying our 12 months forward EPS estimate to the market multiple and applying a 5% discount. Key downside risk relates to the level

58、 of mobile market share losses and competitive pressures on ARPU.Forecasts and ratiosYear End Jun 302017A2018A2019E2020E2021ESales (AUDm)25,76525,76625,39225,39225,656EBITDA (AUDm)11,18910,2079,1679,5229,559Net Prot (AUDm)4,2643,7192,6113,0243,224EPS (AUD)0.350.310.220.250.27OLD EPS (AUD)0.350.300.3

59、00.280.22% Change-0.2%3.9%-27.8%-8.4%21.7%EPS Growth (%)7.8-11.6-29.815.86.6PER (x)12.210.414.312.311.5PE Relative (x)EV/EBITDA (x)6.05.45.85.45.2DPS (net) (AUD)0.310.220.160.190.23Yield (net) (%)7.26.75.06.07.3Franking (%)100100100100100Source: Deutsche Bank estimates, company dataTelstra Financial

60、sRevenuesWe forecast Telstra should report Total Revenue CAGR of -1% over the next ve years. We expect revenue growth in Mobile, recurring NBN DA income, NAS, Media, and Global connectivity to be more than oset by revenue declines in Fixed and Data & IP.We expect Fixed Line revenue CAGR of -6% over