7th June 2013
UK stockbroker The Share Centre is tipping BT has a ‘buy’ following some strong results from the fixed-line telecommunications giant writes Philip Scott.
In May the FTSE 100 listed group announced to the market that for the year ended 31 March, pre-tax profits rose 2% to £2.5bn, even though revenues endured a 5% fall £18bn. The telecommunications industry as a whole saw revenues fall 0.2% last year to £72.2bn in 2012, compared to revenue growth of 1.3% in 2011. But despite squeezed sales, net profits of the fixed line communications sector saw healthy growth of 23.4% in 2012.
Sheridan Admans, investment research manager at The Share Centre, says: “BT offers investors an attractive yield and expects to grow dividends by 10-15% per annum over the next three years.
“We are upgrading our recommendation for investors to a ‘buy’ as the forward P/E looks undemanding and BT could be in sight of achieving its gross revenue target, having demonstrated it can expand and invest for future growth without being a headwind to cash flow expansion.
“Recent results have been very strong with operating efficiencies supporting earnings, debt down significantly, increased cash flow and earnings up considerably despite revenue growth being flat.
A rise in demand for its high speed broadband and television services has helped boost figures and Admans expects investors will be pleased to hear the roll out of its new sports channels and the recently added 60,000 subscribers for its video-on-demand service could start to see the company take market share from other subscription providers.
“The impact of the Eurozone crisis has been a drag on its global services operation, which accounts for about 40% of its revenue. However, the company saw a solid rise in new orders for the division and revenue is expected to improve in the second half of the year, which should provide some relief.”
BT’s share price has jumped by more than 52% over the past 12 months, 33% was achieved in the past six months alone. Its shares are trading at 312.4p, as at June 7, during intraday trading.