Has Telstra’s Share Price Hit Resistance? Property Sales May Be Key

At time of writing, the share price of Telstra Corporation Ltd [ASX:TLS] is up 1.05%, trading at $3.85.

As you can see below, barring a minor slide between September and the New Year, the Telstra share price has been on a strong run in the last 12 months:

asx tls

Source: tradingview.com

A couple of things to note about the chart:

  1. A strong run up to the $3.80-$3.85 range and resistance dating back to early January of last year.
  2. If the Telstra share price manages to push through this, the next point of resistance could be in the $4.30 range.

The company’s most recent announcement was a conference call transcript, where CEO Andrew Penn provided an update on their progress towards the T22 goals.

Perhaps the most interesting question in this conference call was from JP Morgan’s Eric Pan, who discussed Telstra property sales.

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Telstra share price choppy, but remember the property trust in August

With a decent gain today, trading in Telstra shares over the past two weeks has been choppy, and this could mean that resistance has been reached and limited short-term gains will materialise at least until August.

In an alternative scenario in the coming weeks, the Telstra share price could breakout to test new two-year highs.

I suspect it will be the first scenario, as I’ll explain.

I thought the question about Telstra property sales is particularly relevant, given what is happening in the real estate market at the moment.

It is worth noting that Dexus Property Group [ASX:DXS] is trading just off of all-time highs.

With 53 office properties and significant exposure to office rents, the company demonstrates the divide between the Australian housing market and the commercial property sector.

If office rents improve, this will show up in the Dexus share price.

Going back to the question of the Telstra share price, it is worth noting that the Australian Financial Review reported back in May that Telstra was looking to start a property trust that could net the company $1.5 billion.

A lot of people forget the role real estate plays in these major companies.

Harvey Norman Holdings Ltd [ASX:HVN] for instance, derives a significant portion of its value from the fact that its property portfolio is valued at $2.93 billion, as of its latest half-year results.

In essence, it’s a real estate company, you could say.

People often forget about assets.

So if Telstra is to get $1.5 billion from the property trust, this could be a major windfall for the company.

When Mr Pan asked a question related to the property trust, this was CEO Andrew Penn’s response:

I think the short answer on the part on our T22 program which is realising $2 billion worth of assets.’

This could potentially prop up its August results.

But will Telstra get value for money from the property trust?

I suspect that with the RBA cutting rates, the mid-cycle slowdown for real estate will be somewhat muted. But I also believe, due in large part to my work with Phil Anderson, that the property cycle still has around seven years to go.

So with commercial real estate proving itself to be more immune to a downturn, the property trust idea may prove to be fruitful for the company.

In the short term.

A few years from now, the company may well be kicking itself though.

Property aside, Telstra is a behemoth of a company and its restructuring effort will take time to bear fruit.

Short term, it is possible that much of the 5G push has been priced-in for Telstra and there are better options available, particularly if you are looking for dividends.

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Lachlann Tierney,
For Money Morning

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:

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