TPG Telecom Ltd

TPM Details
Debt is expected to increase in FY 17: TPG Telecom Ltd (ASX: TPM) reported a 69% increase in the Net Profit After Tax (NPAT) of $379.6m in FY 16 and a 61% increase in the earnings per share to 45.3 cents per share. Moreover, TPM expects the underlying EBITDA for the group to be in the range of $820m to $830m in fiscal year of 2017, excluding any impact from potential operations in Singapore and the capital expenditure is expected to be range of $370m to $420m.
 

FY 16 Financial Performance (Source: Company Reports)
 
The guidance for capex in FY 17 includes the $72m for 1800 MHz spectrum, $50m for committed international capacity purchases (SX & SEA-US) and substantial fibre rollout capex. In addition, TPG has a bank debt of $1,350m and a net debt to EBITDA leverage ratio of about 1.8x at the end of the FY 16 ending 31^st July 2016. TPM stock has fallen 42.81% (as of November 22, 2016) in the last three months due to struggling core business coupled with rising debt and capex concerns. The group will hold its AGM on December 07, 2016. We give an “Expensive” recommendation on the stock at the current price of – $ 7.20

 
TPM Daily Chart (Source: Thomson Reuters) 

Vocus Communications Limited

VOC Details
Completion of Nextgen Acquisition: Vocus Communications Limited (ASX: VOC) has completed the acquisition of Nextgen and two development projects, the Australian Singapore Cable and the North West Cable System for $806.7 million as upfront consideration and $54 m as deferred consideration. VOC had planned to expand its connection points to the NBN from 68 to 112 of a possible 121 nationwide NBN points of interconnect (POIs). Moreover, VOC is completing the integration of the Amcom business with the synergies target of $13-15 million, expected to be achieved by the end of FY17. The merger with the M2 business is also proceeding with all integration milestones being met and the $40 million synergy target is on track to be completed by the end of FY18. On the other hand, VOC has announced the resignation of James Spenceley and Tony Grist as two of its board members. The resignations are after a difference of opinion between the Departing Directors and the Board on an alternative leadership framework. Moreover, VOC stock has fallen 42.21% (as of November 22, 2016) in the last six months while being up about 3% on November 23, 2016, and still the stock is trading at a high P/E. The group will hold its AGM on November 29, 2016. We give an “Expensive” recommendation on the stock at the current price of – $ 5.41

 
VOC Daily Chart (Source: Thomson Reuters) 

Telstra Corporation Ltd

TLS Details
Rising capital expenditure: Telstra Corporation Ltd (ASX: TLS) has given the detail about the $3 billion incremental capital expenditure, a commitment to expand its productivity target to at least $1 billion over the next five years, and a review of the company’s capital allocation strategy. The $3 billion expenditure will entail use of more than $1.5 billion in building networks for the future, around $1 billion in accelerating the digitization of the business and up to $500 million in other customer experience related improvements. TLS is expecting to reduce the net underlying core fixed costs by over $1 billion by FY21. Additionally, TLS has reported 6.3% growth in revenues to $28.3 billion in FY 16 and 36% growth in the net profit to $5.8 billion including $1.8 billion from sale of Autohome shares against FY 15. TLS’s outlook entails ‘mid to high’ single digit revenue growth, and ‘low to mid’ single digit EBITDA growth in 2017, indicating some weakness. Meanwhile, TLS stock has fallen 13.43% in six months as on November 22, 2016. Given the prospects, we maintain an “Expensive” recommendation on the stock at the current price of – $ 5.00

 
TLS Daily Chart (Source: Thomson Reuters) 

Macquarie Telecom Group Ltd

MAQ Details
Higher valuations: Macquarie Telecom Group Ltd (ASX: MAQ) reported a 5% growth in the total service revenue in FY 16 and a 223% growth in NPAT. MAQ also reported a 23% growth in the EBITDA as compared to FY 15. Moreover, EBITDA profit for the first half of FY17 is expected to be between $17.0 million to $19.0 million, up from $15.6 million in the previous corresponding period.
 

FY 16 Financial Performance (Source: Company Reports)
 
The expected capex is $21 to $23 million. MAQ stock has fallen 13.39% in three months as on November 22, 2016 due to concerns over volatile market conditions while trading at an unreasonable P/E. We give an “Expensive” recommendation on the stock at the current price of – $ 11.00

 
MAQ Daily Chart (Source: Thomson Reuters) 

Hutchison Telecommunications (Australia) Limited

HTA Details
Weak bottom line performance: Hutchison Telecommunications (Aus) Ltd (ASX: HTA) in 1H 2016 has reported the statutory net loss of $65.7 million, representing a $24.4 million improvement in the $90.1 million net loss in the corresponding period of 2015. HTA’s revenue from ordinary activities consists of the interest income received on loans to VHA and has increased 46.4 per cent to $3.6 million as a result of increased shareholder loans provided to VHA in first and second quarters of 2015.
 

Financial Performance (Source: Company Reports)
 
Meanwhile, no dividend was declared or paid by HTA during the half-year 2016. But given the bottom line pressure, we give an “Expensive” recommendation on the stock at the current price of – $ 0.07

 
HTA Daily Chart (Source: Thomson Reuters)

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