Telstra has had its price target cut by analysts at UBS after reporting "uneventful" earnings and slashing its dividend on Thursday. 

The telecommunications giant cut its dividend as it revealed rising charges associated with the NBN rollout will blow a bigger-than-expected hole in its earnings.

Analysts at UBS cut their Telstra price target to $3.90 from $4.30 following the company's profit results.

"Few, including us, had anticipated how quickly (by FY18), and dramatically (31¢ DPS cut to 22¢), the dividend profile would be cut," UBS analysts told clients. 

"Besides the dividend, we also reset our long-term EPS (earnings per share) outlook – as we had underestimated the pace of fixed margin declines, and the extent one-off NBN contributions were underpinning near-term EPS." 

Telstra had previously predicted its underlying earnings would fall between $2 billion and $3 billion as a result of losing much of its wholesale business to the NBN.

But the telco on Thursday said its analysis suggested the long-term wholesale charge of access to the NBN, the controversial Connectivity Virtual Circuit (CVC) charge, would double in the coming years, pushing its earnings black hole to $3 billion.

While Telstra left its 2016-17 dividend payout unchanged at 31¢, the company expects total dividends would fall to 22¢ in 2017-18. This includes ordinary and special dividends to be paid as a result of one-off payments from NBN.

On Telstra's proposed options for its NBN Co payments, including securitisation, UBS said: 

"Many hurdles to potential securitisation remain, but we think investors may be underestimating the implied valuation of the ISA (Infrastructure Services Agreement) receipts."

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SumoSalad's decision to place some of its franchised businesses into administration appears to have been the first step in a longer term process which may see the 104-store fast food chain bring in new investors or even change hands.

SumoSalad's owners are understood to have kicked off a strategic review to consider a range of options, which may include raising external capital for expansion or a change of control.

Street Talk understands SumoSalad has appointed Matt Rogers from Allunga Advisory to oversee the strategic review. Rogers sold men's shoes brand Aquila to Blue Sky Private Equity late last year.

A spokesman for SumoSalad co-founder and chief executive Luke Baylis confirmed last night that the company had hired Allunga "to help accelerate the company's omni-channel growth strategy."

The normally low-profile Baylis hit the headlines in June when the company used insolvency laws to force Westfield shopping centres to negotiate lower rents for some of its struggling franchisees in Westfield shopping centres.

As reported by the AFR's Chanticleer columnist Tony Boyd, the two parties are close to agreeing a mutually favourable commercial outcome.

The deal will be closely watched by the thousands of retailers operating in large shopping centres because it will show that it is possible to tip the balance of power from landlords back to tenants.

Baylis says some SumoSalad franchisees have suffered from the opening of new food eating areas in Westfield centres. The new retailers are aimed at boosting foot traffic but have cannibalised sales at SumoSalad outlets.

In mid-June, SumoSalad appointed Morgan Kelly and Peter Gothard from Ferrier Hodgson as voluntary administrators of SumoSalad (Leasing) Pty Ltd and SumoSalad (Leasing) Westfield Pty Ltd.

All SumoSalad leases are held in separate companies within the SumoSalad Group.

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Plenary Group and Cintra-backed Netflow has hired Deutsche Bank and RBC Capital Markets to advise on its likely $5 billion-plus bid for NSW roads project WestConnex, as first reported by Street Talk. 

It is understood Netflow signed the investment banks this week, with WestConnex's auction expected to get underway in September or October. 

Up for grabs is a 51 per cent stake in Sydney Motorway Corporation, which was established to build and own the motorways project. 

Netflow - the newly formed venture between Australia's Plenary Group and Cintra - shapes as a serious bidder, and is expected to team up with Canadian investors Caisse de dépôt et placement du Québec and Borealis Infrastructure. 

The consortium will have to beat ASX-listed Transurban Group, which has a trio of investment banks lined up to help with its bid and also has the support of AustralianSuper. 

Proceeds from the deal will be put towards funding the state's contribution to WestConnex's third and final (and most expensive) phase, a 9.2 kilometre tunnel linking the existing M4 and M5 motorways and due to be open to traffic in 2023. 

The government is expected to consider selling its remaining 49 per cent once stage three is at or near completion. 

UBS analysts expect WestConnex's three stages to be generating $1.083 billion in annual earnings by the 2030 financial year. 

 

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Tradie training group Australian Industrial Systems Institute has appointed boutique advisor Lempriere Capital to run a strategic review, Street Talk can reveal.

Having fended off approaches from private equity and offshore parties during the dark days of the crisis that claimed the likes of Acquire Learning and Vocation, AISI, owned by industry veteran Roula Tsiolas, will kick off negotiations with potential investors next week.

"For some time now we have been approached by private equity to either invest in or acquire [AISI]," Ms Tsiolas told Street Talk. "The sector is attractive and privately funded education is a high-end, quality service backed by a national government strategy."

"We are considering our strategic options, which may include external investment to support established growth plans."

AISI offers qualifications for overseas students in areas where there is an identified shortage of skilled workers. An area of focus is building and construction with AISI seeking to close the global skills gaps in response to an outburst of infrastructure investment. The company also expanded to include drone training in 2015.

Education assets are obviously not the easiest sell following several high profile blow-ups, including Vocation, which collapsed after one of its key subsidiaries was stripped of $20 million in government funding.

However, AISI is keen to differentiate itself, pointing out that it is not reliant on government funding. Full fee-paying international students obtain visas to study based on the government's skills shortages advice.

The company has recorded revenue growth of 49 per cent since 2015 financial year.

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If Origin Energy is right - and bidders are preparing to pay up for its conventional oil and gas spin-off Lattice Energy - it's time fund managers sharpened up their knowledge of Beach Energy. 

The Luminis Partners and Credit Suisse-advised Beach is one of two bidders left in the Lattice auction.

Bids are due early next month and Beach is expected to go head-to-head with Sydney-based private equity investor Questus Energy and its partners, advised by Morgan Stanley. 

Lattice is on Origin's books for about $1.3 billion after a $357 million writedown announced only last week. Analysts say that's a good sign Origin expects to receive $1.3 billion for the business, although they reckon it could go for up to $1.5 billion depending on how hard Beach and its rival go in the final stretch.

Macquarie Capital and UBS are running the auction and spearheading efforts to drum up a third bid via an initial public offering. 

Beach has been the frontrunner all along. Chief executive Matt Kay has spent plenty of time in front of analysts and fund managers talking about company-changing growth through M&A and more than a year into the top job, the former Oil Search head of strategy seems keen to secure his target. 

The biggest question is how to fund it - and finding the right balance between debt and equity. 

Beach must either take on a whopping debt package to cover both the acquisition and Lattice's capital expenditure plans in the Otway and Waitsia projects, or turn to its shareholders. 

Beach's market capitalisation is $1.2 billion. If it elected for a $1 billion-odd equity raising, then shareholders are likely to face a one-for-one sized rights issue.

Credit Suisse is on board to help with the funding task and will be doing their best to find cornerstone backers to pile into the offer or at least be there at the back end should there be shares left over. A large chunk of Beach's share register is in retail investor hands, which adds to the risk. 

Of course Beach could also always turn to its biggest shareholder, Seven Group, to help out.

Life at Seven is looking rosy; its shares are at close to a 10-year high, thanks to improved demand for its industrial equipment. And would Kerry Stokes' Seven baulk at the chance to increase its stake in Beach via a company-changing deal by offering to backstop the raising? 

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