I tend to view telecommunications stocks such as Vodacom, MTN, and Telkom, as “utility” type investments.
Whilst earnings growth is elusive, there is at least the yield factor to consider and in this regard Vodacom has appeal at the right share price level and is preferred to MTN.
The stock was too richly priced at over R180 a few months ago but was also on the cheap side at around R140.
The stock has bounced up quite strongly since the beginning of January but at R165 I regard this as time to take money off the table.
On a DCF valuation methodology, I derive fair value of R152 per share with a target price of R160 per share.
Vodacom is now a Trading Sell but it is retained as a Portfolio Buy for longer term holders of the stock.
Share price: R165,06
Net shares in issue: 1,721 billion
Market cap: R284,0 billion
Forward PE F2018: 18,5x
Forward PE F2019: 17,7x
Forward dividend yield 2018: 5,0%
Forward dividend yield 2019: 5,2%
Fair value per DCF: R152
Target price: R160
Trading Sell and Portfolio Buy