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On first blush, TLS looks to have announced a reasonably pleasing result. 2014 revenue grew 3.5% to $25.32 billion, which was very modestly above forecast. Net profit was also slightly above consensus at $4.3 billion, and while the 15 cent dividend was broadly expected, it reinforces Telstra as a firm yield play. Free cash grew 48.9% and as a result of the excess cash, Telstra has decided to return A$1 billion to shareholders through a buyback. Don’t get too excited by this though as it is less than 1% EPS accretive.
Looking at the earnings numbers, it seems they are mixed. Group revenue fell 5.5% to A$1.854 billion, modestly below consensus. Operating EBTIDA gained 1.8% to a$306.4 million, which was in-line, while the 2 cent dividend was slightly above. Much of the information was known given the May trading update; however with high levels of short interest, today’s trading will be interesting.
Also due to report today we get numbers from SGT, FXJ, DXS, CWN and GMG. With US and European markets moving broadly higher overnight, the Australia index has come along for the ride and a positive open is expected from the cash session. A push through yesterday’s session high of 5534 would be positive and this level also represents the 50% retracement of the 3.9% sell-off seen at the beginning of August.
Hong Kong HS50 cash (Hang Seng)
Despite a collapse in Chinese lending yesterday, the Chinese mainland and related markets have seen better buying. The HS50 cash is now above the 25,000 level for the first time since May 2008. Clearly this is one of the more bullish looking global indices around.
Sterling was smashed last night against all G10 currencies as the BoE sliced its forecasts for Q4 2014 wage growth from 2.5% to 1.25%. IT also made mention that it will take three years to eliminate economic slack, which was previously stated at two to three years, while also saying there was ‘heightened uncertainty’ in this economic slack. Looking at the swaps market, we can see it is now pricing in 54 basis points of hikes over the coming 12 months, falling from 67 basis points just before the speech.