Morgans Financial Limited

In mid-April TLS announced it had divested 47.7% of Autohome for ~A$2.1bn. Gearing sits below the bottom end of the Board's target gearing range. Consequently, TLS has announced a capital management program of at least A$1.5bn. In October 2014 (when TLS had a higher franking balance than now) it completed an A$1bn off-market buyback. We have to wait until TLS's result for capital management details but expect the most obvious structure is an on-market buy-back which would allow TLS to lower its share by ~2% (at today's price) without having to dilute its franking balance. We await TLS's FY16 result for quantification of capital management initiatives. We think an on-market buy-back looks most likely, but we have not yet included this in our forecasts. See the update on Telstra here: (VIEW LINK)


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