mansfield resigns, page-15

re: mansfield resigns (to gse) Hi Gavin,

Dramatic, late night exits (well after market close) are generally associated with price weakness in the next few trading days.

Remember also that the Q3 market update is due out very shortly. Last year, this update was released on 16th April. So, what news does that hold for shareholders? With the Chairman gone so suddently - probably negative.

Going to the broader aspects of your question, however, shocks associated with loss of major contracts, significant profit warnings can generally result in a 10-25% short term price correction. However, the worse the profit warning, the deeper the subsequent price correction (ie: up into the 40% range).

When Directors or CEOs resign without warning, the reaction can be positive or negative, depending upon how loathed they were in the market place. In these instances, the short-term price correction can broad-range 10% to the downside, through to ~5% on the upside (sometimes more, if a strong, positive replacement is quickly found - ie: CML and John Fletcher, in the early days).

With Mansfield's resignation, this was entirely unexpected. Sought, but unexpected. He had already weathered a number of storms and had shown no signs of budging. Now, it is being reported that:
1)
he was meant to be on leave over Easter and beyond (nothing unusual here);
2)
he called an urgent, unscheduled Board meeting for yesterday afternoon;
3)
at the Board meeting, he faced a mutiny amongst his fellow directors;
4)
no succession planning has occurred at a Board level (as a search for a replacement Chairman is yet to begin, with Ralph there on an interim basis);
5)
senior management were caught unawares (comments attributed in the AFR Age to both Stanhope and to Moffat; and
6)
Mansfield's sudden yearnings for the more philosophical things in life according to his Chamber of Commerce speech last night.

Considered together, these pointers have suggested to me a negative spin on his resignation, but with more still to be revealed.

For this reason, I considered that the stock will come under selling weakness today (especially, also, considered that Howard's previously favoured appointee has left).

If you also consider that the Communications Minister, Daryl Williams, has also quit (and will leave at the next election), after only ~6 months in the job, then the Federal Government has all but lost interest in pushing ahead with its Telstra privatisation claims for now (probably, for the next 2+ years, at least).

Considered together, I felt that Telstra's share price has not yet priced in these mixed pieces of news, and hence, why I suggested a likely $4.35 - $4.40 price range. This would be ~5% down on yesterdy's closing price of $4.56 and that's about the level of impact that I would be suggesting for the share price going forward.

Most analysts out there, however, still have a much higher share price target in mind (at, near or above the $5.00 mark).

One final query:
What now happens to Telstra and 3G? For the next 6-12 months, at least, this will arguably be stalled, meaning that any proposed rollout agenda is now likely to be set back at least another 12 months (into late 2006 or 2007). For HTA, this is likely to be good news (if not now, then certainly by mid year).

One other final query:
Telstra is shortly to announce its first half results, having gone into pre-announcement mode (from a trading perspective, etc). A Chairman, therefore, leaving his post immediately and just prior to the Q3 market update being made also suggests forthcoming bad news. Hence, the possible overshoot into the $4.20s range (ie: 7.5% down on yesterday's close).

Trust that this helps.