Buy, hold or bail?

Published in The Advertiser, September 2006 by Anthony Keane

Telstra shareholders might not want to hear the predictions of share analysts who can still comment on the company.

With most analysts gagged by their employers from talking about Telstra or its upcoming $8 billion share sale, it is difficult to get an overall opinion on the company’s outlook.

A survey of 15 analysts by CommSec shows three ‘buy’ recommendations, two ‘sells’ and 10 ‘holds’, but industry insiders say these recommendations are unreliable given many of those making the forecasts are involved in the float.

Those that will talk, however, are not pulling any punches.

‘My view on Telstra is why would anybody want to own it?’ said Wealth Within chief investment analyst Dale Gillham.

‘Its lost 60 per cent in six years,’ he said, noting that share slumps of other companies such as Brambles and Lend Lease had only lasted two to three years.

‘People are losing not only money but opportunity. They would have been better off in a BHP, NAB or CBA which is going up, and paying good dividends.’ Mr Gillham said he believed Telstra shares could fall as low as $3 in coming months amid uncertainity about the government sale, which is scheduled for October and November.

Baker Young Stockbrokers associate director Wesley Legrand said Telstra had uncertain growth prospects and an uncertain dividend policy after next year. ‘The market hates uncertainty,’ Mr Legrand said.

‘I’m selling them for clients but that’s not to say it can’t go up. Nothing’s 100 per cent in the share market.

‘The test is would you buy them now? If not, then why hold them?’

Taylor Collison director Michael Whiting said the outlook depended on Telstra’s success in its battle against the Australian Competition and Consumer Commission.

‘The regulations are onerous and are limiting its growth potential,’ Mr Whiting said.