Money call on hold

Apr 7th, 2010 – 1 Comment

At that point the question becomes will a suitor surface that sees MTB as the belle of the ball that they want to take to the altar?


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mts

Do you see Manitoba Telephones getting back to $42.00 in the next year?

Flo

 

Hi Flo,

The best case for a turn towards the $42.00 level for the shares of Manitoba Telecom Services ( MTB TSX) is a takeover bid with a significant premium.

 

mbt

The three year chart tells the tale of woe that has befallen investors. MBT has been selling off aggressively for most of the last 3 years  and every attempt to reverse the trend has failed.

The death cross came in November of 2008 and there has been resistance along the 200 day moving average all the way down. Through most of 2009 MBT has been range bound meeting resistance at $36.00 and finding support at $31.50 – $32.00.

 

 

 

 

 

mbt2

The six month chart is again showing the resistance that the stock meets along the 200 day moving average with support coming in at $31.50.

 

When you consider the possibility of a takeover we are talking the realm of speculation. If that is what you are anticipating will get you back to $42.00 then its an all or nothing outcome. I think that the potential for organic revenue growth is quite muted and one of the contributing factors in the multi- year decline in the stock.

Yes the dividend yield at 8% is very attractive but lets not forget that dividends on common stock are issued at the discretion of the board of directors. The other factor to consider when evaluating dividends is to look at the payout ratio. If most of a company’s free cash flow is being used to pay dividends then there is a muted case for a growth story to drive the stock higher.

 

Canadian telecommunciations regulators are currently considering changes to ownership rules that could drive consolidation in the telecommunications space as foreign players are allowed greater latitude in the sector. At that point the question becomes will a suitor surface that sees MTB as the belle of the ball that they want to take to the altar?

Currently the charts and signals are not suggesting that the invitations to the wedding are in the mail but as with all potential investments put this one on your watch list to see how the right side of the chart develops.

 

Happy Capitalism!

Categories: Telecommunications
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