TLS – Morgans rates the stock as Add

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Telstra has announced a significant simplification of its operations. FY19 is expected to be affected by restructuring and delays in the NBN.

Morgans understands that guidance, comprised of operating earnings of $8.7-9.4bn, assumes lower over-usage, restructuring costs and meaningful delays in the NBN.

Morgans suspects lower earnings translate to a lower dividend, regardless of timing delays, and has downgraded FY19/20 dividend estimates to $0.17 per share. The broker retains an Add rating and reduces the target to $3.42 from $3.99.

Sector: Telecommunication Services.

Target price is $3.42.Current Price is $2.77. Difference: $0.65 – (brackets indicate current price is over target). If TLS meets the Morgans target it will return approximately 19% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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