Strong take up of T3
Published in The Courier Mail, October 2006
Erica Thompson
STRONG demand for T3 shares from wealthy investors could push the final instalment price above $1.50, analysts say.
The prediction comes after the Government revealed it had pre-sold half of its total T3 allocation to clients of broking firms and financial planners ahead of yesterday's retail offer opening.
Fat Prophets senior equity analyst Greg Canavan said strong broker interest could trigger renewed confidence in the Telstra stock among retail investors.
"It does indicate solid demand for the shares after they list, which is going to be good for the people who have picked them up," he said.
"The one question mark is whether the enthusiasm for T3 is purely because of the dividend yield on offer or whether it's more of a long-term bet on the turnaround of the company."
The Government has left open the option of increasing the share sale by $1.2 billion through an over-allotment option, known as a greenshoe.
But Finance Minister Nick Minchin told CNBC television yesterday there were no plans to increase the size of its offer.
"The only circumstances really in which we'd increase it are to meet the demand from existing shareholders," he said.
Retail investors have been offered incentives such as bonus shares and a 10¢-a-share discount to encourage them to buy into the offer, but the full price of T3 shares has yet to be set.
Mr Canavan said the second instalment, which will be announced on November 20, was likely to be about $1.50.
"(The demand) could create a little bit more pricing tension for the institutional bid, which could push the share price up a little higher, but we still think it will come in reasonably attractive," he said. "We had said somewhere in the range of $3.50 and $3.80, so it looks to be at the lower end of that."
Steve Johnson, managing director of independent tipsheet The Intelligent Investor, predicted a second instalment price closer to $1.60 given the attractive instalment offer.
"The institutions might be prepared to pay an effective price of $3.75 for those shares if they don't have to pay for them for 18 months," he said.
While sophisticated investors stood to make healthy gains, some analysts were skeptical of the benefits to smaller players.
"Unless you're comfortable doing these advanced strategies, you're much better off looking for other shares to buy in the marketplace," said Dale Gillham, chief analyst at Wealth Within.
Mr Canavan also urged investors to stick with what they know.
"Nothing is ever a gimme in investment markets, although this is pretty close to it, so I imagine that's why you're seeing a lot of margin lending against these instalment receipts purely because the cost of funding is well below the dividend payment you're going to get. But it doesn't mean everyone should go out there and dive into it."
Retail investors have until November 9 to apply for T3 shares.
