BT Group plc (LON:BT.A) shares are trading 0.12 pct higher on a day-to-day basis at 413.80 at 09:00 on Monday.
Analysts at Berenberg Bank have today told clients they remain buyers of the BT.A share price.
However, of interest in today's communique is the issue of BT Group's pension deficit which should be considered an opportunity.
Analyst Barry Zeitoune says:
"Pension opportunity: It is hard to look at BT’s pension deficit and think of it as an opportunity; however, we believe it is. Our base case had been that BT would see its pension top-up leakage increase from £325m pa currently to £600m-700m pa after the June 2014 triennial review.
"This is worth an effective 2ppt hit to FCF, which would be present for at least the next three years, and more likely a further 10 years. However, with its strong balance sheet, BT can avoid this. By paying off the pension deficit upfront, based on our £3.9bn net calculation, BT would add 0.6x turns of net debt to EBITDA to our 1x FY15 estimate.
"Paying the deficit now would maximise the tax benefit before the 1 April corporate tax rate cut, and would lower BT’s blended interest costs by 1-2ppt. The net impact is a very powerful 2ppt benefit to the FCF yield."
Markets in slow start to the week
The FTSE 100 is trading in the red on Monday morning with European equities following the weak leads from the US and Asia.
"There are a few China jitters after reports of banks restricting lending to property companies in an attempt to head of a housing bubble, but moving growth away from property speculation and towards a more diverse range of industries is probably a good thing in the long run," says Jonothan Sudaria at Capital Spreads.
With traders set to take overnight weakness in their stride, they’ll be looking towards today’s German IFO survey for direction which is expected to show that their outlook for economic health is to remain firm.
After an initial rise, the Dow Jones dropped towards the close ending 12 points down at 16,113 on the back of worse than forecast existing home sales data.
Meanwhile, the Fed comments about the stimulus cuts seem to suggest that ‘measured steps’ does not mean slowing the pace of tapering. Some investors could be fearing that cutting too quickly might threaten the recovery.
Following a G20 meeting in Sydney, the European Central Bank President Mario Draghi reiterated the central bank is ready to add more stimulus should the outlook deteriorates although deflation is not visible.
The shared currency gained a mere 18 pips versus the greenback last Friday to finish the week at 1.3737 and this early morning, so far looks in no mood for a breakout in either direction.