future fund sell down, page-31

southern cross valuation
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• Our current bear-case regulatory risk is valued at 80cps (i.e. Price Target
would be $4.00 if we reflected all the regulatory risk).
Investment thesis
Our investment thesis is based on our view that TLS remains the market leading
Telco, supported by:
• The most recognised brands;
• Diversity of customer proposition;
• With scale of customers supported by TLS’s distribution strength (i.e. sales
and marketing).
We have TLS on 9.7x our FY10 earnings and a 8.9% dividend yield in FY10. We
forecast free cash-flow to increase from 29cps in FY08 to 48cps in FY10 ($5.9b).
This provides strong support to the dividend, while the recent comments by
Treasurer Wayne Swan of the importance of maintaining the franking credits is
also a positive for domestic investors