Investment analyst sees little value


Published in AAP Wire, September 2009

Holding shares in Telstra may not make good investment sense and some investors might have been better off parking their money in a bank account for the past 10 years, a market analyst says.

"I have said it before and I will say it again, for the life of me I cannot understand why anyone would want to own Telstra, it just does not make good investment sense," Dale Gillham, chief analyst at boutique investment company Wealth Within, said in a market report.

Shares in Telstra have see-sawed this week after the federal government on Tuesday announced reforms to the telecoms industry and proposed Telstra split its retail and wholesale arms, by either voluntary or forcible means.

The government said it wants to create a more level playing field in the market ahead of the build-out of its $43 billion high speed national broadband network.

Some $2 billion was wiped off Telstra's market value on Tuesday when the stock fell 4.31 per cent.

It rose 4.18 per cent on Wednesday and edged up two cents on Thursday.

Telstra was down one cent to $3.25 at 1301 AEST on Friday.

"The announcement this week that the government is forcing Telstra to break up its operations has compounded the fall in the share price, although in my opinion it is a good idea and one which may see the share price actually start to rise," Mr Gillham said.

Mr Gillham noted that while many investors continue to hold Telstra shares for its dividend payouts, there were other stocks that also paid solid dividends.

"There are many other good stocks on our market that pay solid dividends, and contrary to Telstra have actually risen in price over the years," he said.

"It takes a lot of dividends to recoup from a fall of over 60 per cent, which Telstra has suffered over the past 10 years.

"If you look at the real return investors received by holding onto this stock in the past 10 years, you would find most, if not all, would have been better off investing their money in a bank account."

Analysts said earlier this week that the impending changes to Telstra's business, flowing from the government's reforms, could improve shareholder value in the future.

Brokers Royal Bank of Scotland, UBS, Goldman Sachs JBWere and Merrill Lynch all this week maintained their buy ratings on Telstra shares.


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