Insights

2 non-telco sectors that could prove pivotal to Telstra’s (ASX:TLS) growth

Telstra has plans to grow into other sectors: health and energy.
The post 2 non-telco sectors that could prove pivotal to Telstra’s (ASX:TLS) growth appeared first on The Motley Fool Australia. –

Telstra Corporation Ltd (ASX: TLS) is planning for other industries to help the telco continue its growth for the longer-term.

The company has focused on telecommunications since it started. It’s the market leader in Australia.

But the company sees opportunities in other sectors.

Telstra says that its ambition is simple, to grow its health and energy businesses profitably and to scale. Management are very excited by these opportunities and are convinced on their strategic direction. It’s focused on the need to increase their economic significance to the value of Telstra. It’s an important part of the new T25 strategy.

Telstra Health

This division is called Telstra Health. Its vision is to improve lives through digitally-enabled care for the community.

It wants to accelerate the digitalisation of health and aged care providers. Telstra wishes to expand its business into international healthcare markets. The company also wants to combine its capabilities to support connected health platforms.

Customers includes public health systems in Hong Kong, Canada, the Middle East and Australia, state and territory governments, public and private hospital groups, aboriginal health services, pharmacies, general medical practices and so on.

By FY25, the hope is for Telstra Health to be earning more than $500 million of revenue in FY25. More than 80% of its revenue is recurring. That could mean it has a growing influence on the Telstra share price.

A few months ago, it announced the acquisition of GP clinical and practice management software company MedicalDirector for $350 million. MedicalDirector has been expanding in the UK in recent years, but Australia is the main place of activity (for now).

MedicalDirector provides software as a service (SaaS) in areas like electronic health records, patient and practice management, billing, scheduling, care co-ordination, medicines information and clinical content. At the time of the announcement, it supported approximately 23,000 medical practitioners and used to deliver more than 80 million consultants a year.

Energy

With energy, the company wants to launch a sustainable, simple and integrated energy proposition, scaling it through Telstra’s channels and helping families save money and emissions.

By FY25, it wants to be a top five energy retailer, with more than 0.5 million customers and enable renewable energy equivalent to 100% of its consumption.

It has a relationship with 5.4 million Australian households and around 0.9 million small and medium businesses. The goal is to capture some of the 1.7 million households that change providers each year – a high proportion of these are already with Telstra. Trials will be done to confirm Telstra’s cost-to-acquire advantage.

It will ramp up marketing from FY23, including to non-Telstra customers, and leverage Telstra Plus with exclusive offers.

Is the Telstra share price good value?

According to reporting by the Australian Financial Review, analysts believe that Telstra Health is the main opportunity.

It was reported that JPMorgan analyst Mark Busuttil said Telstra Health could generate $137 million of earnings before interest, tax, depreciation and amortisation (EBITDA) by FY25 if it generated healthy margins.

Telstra is currently rated as a buy by the broker Ord Minnett, with a price target of $4.60.

The broker notes that Telstra’s is growing its telco market position in non-metropolitan locations. It also recently spent another $616 million on more spectrum. It has spent $11 billion over the seven years to the end of FY22.

Ord Minnett thinks the Telstra share price is valued at 24x FY23’s estimated earnings with an expected grossed-up dividend yield of 5.5%.

The post 2 non-telco sectors that could prove pivotal to Telstra’s (ASX:TLS) growth appeared first on The Motley Fool Australia.

Should you invest $1,000 in Telstra right now?

Before you consider Telstra, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Telstra wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Here are the 3 most heavily traded ASX 200 shares this Friday

These 3 ASX 200 shares are topping the volume charts on Thursday

Telstra (ASX:TLS) pays huge fine for putting Australians in danger

Here are the 3 most heavily traded ASX 200 shares this Wednesday

Is the Telstra (ASX:TLS) share price set to dial in another big year in 2022?

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!