ARTICLES

Telkom

21 January 2019 By PDSNET

Telkom was originally a state-owned enterprise similar to SAA or Eskom. The company went� through some difficult times, retrenching 4500 employees in an effort to right-size and remain profitable. Today Telkom is owned about 40% by the government and 12,5% by the Public Investment Corporation � which means that it is still government controlled � but it has a very substantial private sector ownership and is essentially independent. The company consists of five operating divisions �

1. Openserve, which is an internet connectivity provider with the largest open access network in South Africa,
2. Telkom Consumer is a fixed broadband and internet service provider,
3. BCX is a technology company,
4. Gyro looks after masts, towers and property development and
5. Yellowpages, which is a marketing and advertising company.

In its results for the six months to 30^th September 2018, the group reported adjusted headline earnings per share (HEPS) up 10,3% to 328,6c. The CEPO, Sipho Maseko described the results as �satisfactory� in a difficult economy. The company has been through a torrid period from the second half of 2017 and until about October 2018. This was due to its downsizing and retrenchment of staff as Maseko restructured the business for sustainability. The share price fell to as little as R45, but has since climbed to around R64. At this price we believe it offers private investors a unique opportunity to make a significant capital gain. Consider the chart:

Telkom (TKG) May 2017 to January 2019 - Chart by ShareFriend Pro

At the current price, the share trades on a multiple (P:E) of around 11 with a dividend yield (DY) of around 4,4%. These make the share cheap in terms of its current earning potential. But what really makes it a good buy is its property portfolio which is not recognised or valued at all in the current share price. Telkom owns a property portfolio which is conservatively worth around R24bn, managed by its subsidiary, Gyro. The portfolio consists of 1330 properties including office buildings, residential and undeveloped land. Telkom has the intention of spinning Gyro off into a separately listed company sometime over the next year. This would probably be worth about R45 per Telkom share according to some analysts � so we are suggesting that Telkom offers an almost risk-free way to make a substantial 70% capital gain over the next year.

DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.

Share this article:

PDSNET ARTICLES

Exponential Growth

The  S&P 500 index is important because all the stock markets around the world tend to follow it. If the S&P is in a bull trend then London, Tokyo and the JSE will also be in a bull trend – and vice versa.

The S&P500 index began 68 years ago on 4 th March 1957 with an initial value of 43,73. It took nearly

The US Jobs Market

International investors who trade on Wall Street are generally negative about any good news from the economy because it tends to make the monetary policy committee (MPC) more hawkish and less likely to reduce interest rates. The opposite is also true. But there comes a point where bad news is so bad that investors begin to fear that the US economy is heading

Jackson Hole

Once a year in late August central bankers and academics congregate in Jackson Hole to discuss the state of the economy and consider the way forward. Traditionally, the Chair of the Federal Reserve Bank (“the Fed”) addresses the meeting and gives direction to its thinking on monetary policy in the US. This year, the comments of Jerome Powell resulted in the

Choppies

Choppies is a supermarket chain which operates in Botswana, Namibia and Zambia. It is listed both on the Johannesburg Stock Exchange (JSE) and on the Botswana Stock Exchange (BSE). Notably, the company has resisted the temptation to re-enter the highly competitive and cut-throat retail market in South Africa, having exited that market in 2020 due to sustained losses. Despite

Gold Resistance

All investments throughout the world can be ranked on a scale from high risk to low risk. As a general rule, in the world of investment, risk and return rise together. In other words, as the risks in an investment increase, so does the return necessary to attract investors.

At the one end of the scale there are very low risk investments

Sibanye takes off

We have been writing about Neal Froneman and Sibanye for years now. Beginning in 2013, Froneman assembled the Sibanye group over a period of 7 years, buying up mining operations both in South Africa and America at bargain prices. Initially he bought precious metals producers, but more recently he has been diversifying into base metals like zinc and lithium which

The 16 Year Bull Trend

Since the Second World War, the stock markets of the world, including the JSE, have always tended to follow the New York Stock Exchange (NYSE) - and the NYSE is best measured by the S&P500 index (S&P) of its 500 largest companies.

For this reason, we believe it is important for private investors to constantly

CA Sales Revisited

Retailing in Africa is difficult with many of our leading retailers having attempted to open stores in countries to the North of us without notable success. These countries are often unstable and volatile politically. Getting adequate stock to branches has proved problematic and expensive.

It is not surprising therefore that a company has been

Bluetel

Bluetel (BLU) is a company involved in pinless top-ups, prepaid electricity, ticketing and universal vouchers. As such it is a company with substantial repeat business from existing customers. This type of business model is attractive to investors because it implies minimal working capital and strong cash flows.

Bluetel’s purchase

The Debtors' Book

A BIT OF HISTORY

Many years ago, in 1982 when I started this business (which became “PDSnet”), I ran advertisements in both the Rand Daily Mail (RDM) and in the Star – which were the two most widely read newspapers in Johannesburg at the time. At that time, we were a very small business and had no credit rating at all. Despite this the RDM immediately