Telus Corp T.T

Alternate Symbol(s): TU

Communication Services Telecom Services

TELUS Corporation is a Canada-based communications technology company. The Company provides a range of technology solutions, including mobile and fixed voice and data telecommunications services and products, healthcare software and technology solutions, and digitally led customer experiences. Data services include Internet protocol; television; hosting, managed information technology and cloud-based services; and home and business security. Its TELUS technology solutions segment includes network revenues and equipment sales arising from mobile technologies, data revenues, healthcare software and technology solutions, agriculture and consumer goods services, voice, and other telecommunications services revenues. Its TELUS International segment comprises digital customer experience and digital-enablement transformation solutions, including artificial intelligence (AI) and content management solutions. It is also a cybersecurity provider specializing in advanced penetration testing.

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Telus Corp

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Post by retiredcfon Nov 07, 2022 9:28am

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Post# 35078531

RBC Report

Their upside scenario target is now $37.00. GLTA

November 6, 2022
TELUS Corporation
The Attractive Set-Up in 2023 Just Got Better

Our view: Strong Q3/22 results were slightly ahead of our expectations with incrementally more positive management commentary around the 2023 outlook. Our price target increases from $33 to $34.

Key points:
• TELUS remains our best idea in Canadian telecom. We view 2022 as a pivotal turning point for TELUS as the company transitions into a new post-FTTH build / 5G phase. We expect the company to emerge in 2023 with a distinctively different financial and operational profile relative to most global telecom peers. As FTTH coverage reaches ~85%-90% of the targeted broadband footprint by the end of 2022, enhanced capex flexibility should enable TELUS to capitalize on 5G without meaningful capital constraints, opportunity costs or FCF impairment. Longer term, under certain operational and regulatory conditions, we see strong strategic and financial rationale for TELUS to explore a transformational re-organization that can fully unlock the value of core infrastructure assets and core technology assets.

Adding the “alignment” of EBITDA growth drivers to an already attractive 2023 set-up. Management reiterated the expectation for a reduction in capex from $3.5B in 2022 to $2.6B in 2023 (inclusive of LifeWorks) resulting in an increase in FCF from $1.3B in 2022E to an estimated $2.6B in 2023E. Following Q3/22 results, the updated outlook and management commentary, we believe robust underlying EBITDA growth now represents another “leg to the stool” with respect to the 2023 set-up. We believe our forecast could prove conservative considering: (i) management sees the +5.4% YoY growth in fixed data services revenue growth in Q3/22 as sustainable; (ii) management expects double-digit EBITDA growth from TELUS Health and TELUS Agriculture & Consumer Products with TELUS Health benefiting from $60MM in cost synergies related to LifeWorks; (iii) improved B2B performance with the potential for +3% EBITDA growth in Q3/22 to accelerate to +5% or greater within 1-3 years; (iv) FTTH-related cost savings given the completion of FTTH migration by the end of 2022; (iv) cost efficiencies related to digitization/simplification and copper de-commissioning with management targeting $400MM-$500MM in potential cost savings over a ~36 month period.
Why we believe TELUS’ differentiated asset mix is a key driver of valuation. Applying an EV/EBITDA valuation lens to TELUS, we note: (i) forecast underlying revenue and EBITDA growth of high-single digits is 2x-3x that of peers; (ii) consolidated capex intensity is forecast to decrease from 19% in 2022E to 13% in 2023E; and (iii) favourable risk factors include industry-leading execution, a strengthening competitive position with FTTH/5G and the ability to de-lever by ~0.5x annually given excess FCF, EBITDA growth and likely TELUS Health and TELUS Agriculture & Consumer Products crystallization.