What experts are saying about Telstra’s (ASX:TLS) big restructuring plans

The Telstra Corporation Ltd (ASX: TLS) share price chalked up its third day of gains as brokers pass judgement on its headline grabbing restructuring plans.

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The Telstra Corporation Ltd (ASX: TLS) share price chalked up its third day of gains as brokers pass judgement on its headline grabbing restructuring plans.

The Telstra share price jumped 2.5% to a seven-month high of $3.33 on Tuesday. In contrast, the S&P/ASX 200 Index (Index:^AXJO) dipped 0.1%.

Australia’s largest telco excited the market when it announced it was splitting itself four ways.

Unlocking value in Telstra’s share price

The radical restructure is meant to position Telstra to buy the NBN down the track and to unlock value for shareholders.

While acquiring the NBN is politically sensitive and far from certain, most brokers seem to be optimistic about the restructure.

Goldman Sachs is one that is taking a positive view on the Telstra share price following the restructuring announcement.

Asset split highlights attractive valuations

“This update outlines the next steps of the corporate restructure and potential asset monetization, and gives us confidence that its infrastructure value will ultimately be realized by shareholders,” said Goldman.

“TLS shares currently trade on just 4.1-4.7x ServeCo FY23E EBITDA or 5.7-6.3X at our unchanged A$4.00 12m TP, vs. SPK.NZ at 8.3x.

“We reiterate our ‘Buy’ on TLS, our preferred ANZ Telco, ahead of its FY21 results and Nov-21 ID, both of which we view as positive catalysts.”

Telstra share price looks like an attractive buy

Meanwhile, Credit Suisse also repeated its “outperform” recommendation on the Telstra share price.

The separation of Telstra’s businesses has highlighted how attractively priced some of its key assets are.

“Our analysis of the valuation for InfraCo implies the remainder of Telstra (including ServeCo and Telstra International) is currently valued by the market at 5.8x FY21 EBITDA,” said the broker.

“Given this multiple is applied to cyclically-depressed earnings (given the COVID-19 impact on roaming revenues) and with the Australian mobile market at an inflection point (with TLS guidance for postpaid ARPU to see growth from 2H21 onwards), we are of the view a higher value for ServeCo can be justified.”

Credit Suisse’s 12-month price target on the Telstra share price is $3.85 a share.

Telstra’s shareholders will need to approve the restructure. The company’s plan is to split its assets into InfraCo Fixed, InfraCo Towers, ServeCo and Telstra International.

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Motley Fool contributor Brendon Lau owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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