Telus Corp T.T

Investment Thesis?

[babybunny]

Hi, I am a value investor and have started sniffing around the telecoms as they seem to be heading in the right direction ... i.e., toward my buy price.  

But taking a quick peek under the hood I don't like what I see.  Telus trades at twice book, which is rather rich for my tastes but might be justified if the company boasts extraordinary earning power.

Alas, looking at the previous year results and next year earnings forecast, this does not seem to be the case.  ROE is mired in the single digits.  ROE should be in the 12% - 15% range to justify such a rich multiple of book value.

And to make matters worse, Telus is paying out more in dividends than it earns.  This means the only way they can grow or even maintain their assets is by issuing more stock.  I really hate companies that do this, as it is inefficient from a tax perspective and also tends to suppress the share price as there is always the dilution overhang haunting the stock.

If I am wrong or missing something important, pleas set me straight.  I would not mind having some telecom exposure.

[beelzeebuub1]

Telus is a grade A utility with billions in annual revenue.. CEO Darren bought a whack of shares recently at 23 bucks each..  When you're looking to play defence in a rising interest rate environment, you always have to consider the debt structure of the company you're interested in.. The future may be somewhat unfriendly for stocks, however, my bet is that people will continue to pay

[buttertart]

LMFAO

[Milhouse123]

Unable to

[hoffbag]

Guess you shouldn't buy the shares. 

[Milhouse123]

Without getting too far into the weeds, the company is just starting to come out of a capital intensive period building out its fiber footprint and deploying 5G. Yet the big capital spends still won't be done until about year end 2024 after the last 5G spectrum auction.  T's earnings are impacted by its capex spend from non-cash accounting expenses such as amortization and

[babybunny]

Thanks Milhouse, that is exactly the kind of feedback I was hoping for.       I am still skeptical about a company that emphasizes "free" cash flow when it really isn't free.  As you noted regarding 5G, they have to keep investing like madmen just to keep up with the Joneses (or the Rogerses).  The kinds of companies I am most drawn to seem to be able

[Milhouse123]

WRT the 5G buildout, there should be a bit of a lull in terms of heavy capex spending from 2025 to about the early/mid 2030's when the spend will slowly start ramping up again to deploy 6G.  There will still be some 5G capex spend to deploy in new greenfield areas and make further enhancements like 5G+ but the amount will pale in comparison to the initial buildout and spectrum purchases.&

[Schussing56]

One thing to keep in mind is, India recently made the decision to stop granting visas to citizens wanting to travel to Canada. In 2021, 137 K Indian students came to study in Canada and, a good percentage of them signed up for cell phone service. If Canada doesn't fill this void with students from other countries, telecommunications providers will be materially impacted.

[Milhouse123]

Correct me if I'm wrong but I think that's the other way around.   The Indian government has stopped granting visas to Canadians to visit India.  However, they have issued a travel warning about threats in Canada to try to influence their citizens to not visit.   Whereas the Canadian government has not (yet?) stopped granting visas to Indian students to come to

[Schussing56]

Yes, I thought the same thing. This information was posted on TD Waterhouse. You're right about it being Canadians not being given visas to enter India. Perhaps TD is aware of some reciprocal pressure from the Indian government on its citizens, not to travel to Canada as well? Similiar to what happened with Saudi Arabia after the Jamal Khashoggi killing. I don't know.