TPG boosts profits and EBITDA

Stuart Corner
Tuesday, 20 September 2011 11:12

IT Industry - Listed Tech

For the year to 30 June 2011 TPG Telecom (ASX: TPM) has reported a 40 percent increase in net profit after tax to $78.2m and a 37 percent increase in EBITDA to $234.0m on revenues that were up 13 percent to $574.5m.

The company has given EBITDA guidance of $250m - $260m for FY12. TPG was able to reduce its bank debt by $100m in the year to $232m and to declare a final FY11 dividend of 2.25 cents per share bringing total FY11 dividends to 4.5 cents per share.

However one stock market analyst, Daniel Blair of Bell Potter, was unimpressed. He issued a note saying: "The result does not change our concerns around TPG's business model'¦ We believe the key risks to TPG's business model remain, including a lower customer service focus relative to its peers (possibly resulting in higher churn), price leadership cannibalising the existing returns and believe the NBN will reduce TPG's comparative cost advantages. We prefer iiNet over TPG

(The latest Roy Morgan Research ISP customer satisfaction survey released yesterday had TPG in third place at 78 percent after Internode, 94 percent and iiNet, 91 percent. TPG's ranking had declined steadily from 85 percent a year ago to 77 percent at the end of 2010).

In an earlier and more detailed assessment of TPG Blair had also expressed concerns about the integration of Pipe Networks and the company's uneven share distribution. "There is some evidence that '¦ some processes are strained. It also appears that there is some risk to Pipe's sales and product culture," he said.

And he added: "Given the size of key shareholdings there is a risk that TPG is managed as if it were a private company." (TPG is 36.6 percent owned by David Teoh and 25.8 percent by Washington H Soul Pattinson.)

His view of TPG is, however, contrary to the consensus view of the company, but since Bell Potter started covering TPG in June the share price has been trending downwards, from around $1.75 in mid June to around $1.48 currently.

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