You are going to get a big shock come the conclusion of capital structure review being completed and decisions being implemented.
They will have and absolute minimum of $13b EXTRA capital without ANY increase in debt that could be directed soley to buybacks if they so wish.
This assumes ALL NBN transfer payments over the next 3 years are used in cost reduction programs, more than needed.
They currently payout more than 7% of market cap in dividends when they can borrow for 5 years at the lower end of a 4-5% range.
Earnings hole will amount to 30% in by 2020 NOT INCLUDING cost reduction program, including this brings the difference to 20%, this 20% could be bought back currently for $10b and change.
Full $13b could still cover the 20% if they bought back shares at $5-5.20 a piece, think they might find enough sellers at that price?
The only part of the above scenario that is speculation is buybacks, the rest is all forecast although I added a little to the amount they will use to reduce costs over the next few years to ensure this was actually conservative.
To expect actual growth out of TLS is obviously a high risk fools errand, to treat it like the most attractive inflation linked, tax advantaged bond in existence is more to the point.
The growth we are in full agreement on hence the fact we are both bullish on TPM for their growth prospects
I have my fill of TLS now and my next chunk of available capital will go straight to TPM, I put more in TLS today because I think TPM will have longer till the market appreciates the growth story whilst TLS will be getting re-rated either at FY results or AGM.
TPM Price at posting:
$5.61 Sentiment: Buy Disclosure: Held
