TCL - rock 'n roll 'n then rally?

TCL has been on the nose with the rest of the real asset sector as debt deflation drives a repricing of all assets. However, with its debt levels now down to more manageable proportions, and assuming a security price under $4.00, things are starting to look more attractive. The tea-leaves seem supportive of a foray into the stock...

Firstly a quick look at the fundamentals - gearing on debt to debt plus equity of ~50% is still high, but with senior interest cover in excess of 2.0 times (and EBITDA interest cover 3.1x), it looks fair for the quality of the asset portfolio (and certainly is at the lower end of historically relevant comparisons). At a share price of $4.00, and annualised EBITDA of ~$600m, TCL is trading on an undemanding EBITDA multiple of around 8.5x. This looks pretty fair when you consider peak valuations for airports of 20x and for toll roads of 15x. In summary, with lower debt (ie. less risk) in the business, TCL is still trading at more than a 50% discount to peak valuations. That seems like a good place to start things...

Turning to the charts, look at the weekly price action...

There is a healthy divergence developing in momentum as price made a new low and looks now to retest it.  I'm targetting the $3.86 level which was the terminal point for wave 3 for the current retacement.  Note too the declining volume as price made its low - that is a pretty good signal that wave 5 had run its course and we were past the exhaustion point.

As for upside targets assuming we get a good entry?  I'm expecting a test (and break of the 200 day MA around $5.00 which will also align with the downtrend from the previous absolute highs...at this point I'm thinking that will be wave 1...

Finally, when I work out where and how we should have a look at the long bond but that is another story..