Deutsche Telekom AG (ETR:DTE)

May 19, 2015 | Price: $€16.44

Stock Exchange: XETRA

Overview: Deutsche Telekom AG (ETR:DTE) is a German multinational telecommunications company operating in more than 50 countries. The company is listed on all major German stock exchanges as well as the OTCQX (USA). Deutsche Telekom is the market leader in the domestic German market and also operates in most European markets. The U.S. brand ‘T-Mobile US’ is one of the fastest-growing wireless companies in the United States.

Catalysts: Deutsche Telekom is strategically well placed in the domestic market (Germany) as well as in key European markets. We expect low single-digit revenue growth and a stable dividend payout ratio. The company declared a dividend of €0.50 for the financial year 2014 with the ex-dividend date on 22nd May 2015. The board aims to grow its dividend per share over the next three years in line with free-cash-flow growth, however, a guaranteed minimum of €0.50 per share applies.

Hurdles: A potential exit of Greece from the eurozone as well as risks associated with the quantitative easing program of the European Central Bank (ECB) are general risks for European equities.

Investment View: Deutsche Telekom offers profitable exposure to the German telecommunications sector. The company is well-positioned in the domestic and European markets and experiences growth momentum in the U.S. The dividend yields 3% at current prices. Incorporating single-digit earnings growth in our valuation our 12-month price target equals €17.50. We initiate coverage with a ‘buy’ recommendation.

Disclaimer

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this report is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its reports. As a result, investors should be aware that the S3 Consortium may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making any investment decision. The publishers of this report also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this report.

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The information contained in this report is current at the finalised date. The information contained in this report is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

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