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is David Teohs selling TPG a Telco warning?

Thursday evening saw Macquarie Banks equities desk seeking bids for a $335m stake in TPG Telecom (TPG) – the auction was offered between a 1.8% and 4.8% discount to Thursday’s close which implies solid demand. Mr Teoh stepped down from the board soon after the companies merger with Vodafone and this sale represents about 20% of his holding, perhaps there will be 4 more such sales over the coming years. The 66-year old billionaire might simply be deciding business is not exciting as it was or it’s time to have more R & R, either way we don’t see it as a reason to abandon the stock or sector as opposed the sale being a logical progression through time.

TPG now operates brands such as Vodafone, TPG, iiNet and Internode making it a definite proxy to the general health of the Australian Telco market, the stocks fallen around 25% since it listed as it’s disappointingly struggled to gain traction in a strong market. We feel the huge merger in 2020 should eventually see benefits but buying at a higher price after a decent FY22 report makes more sense in our opinion  i.e. Let’s see some runs on the board – synergistic benefits often take longer to flow through than boards expect, or hope for.

We see long term defensive value closer to the $6 area with support likely from a fully franked yield which is likely to be in excess of 3%.

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MM is neutral TPG
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TPG Telecom (TPG)
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