TPM is in a healthy up-trend, having recently announced a 90 percent increase in earnings for the 6 months ended 31 January 2016 compared to the same period in the previous year. But momentum has been falling since 2014, illustrated by bearish divergence on the chart above.
This excerpt from David Ramli gives a clue:
….speaking to Fairfax Media, Mr Teoh [executive chairman] acknowledged there were challenges ahead as the NBN rolls out across Australia. The NBN is set to replace Telstra’s copper network as the foundation of Australia’s fixed-line phone and internet connections. It will also slash the profit margins of telecommunications that have installed their own equipment in Telstra’s telephone exchanges because the NBN’s wholesale prices will be more expensive.
“There’s no doubt the profit is coming down but the growth is there,” he said. “In business there’s always challenges but we have to find a way to balance the impact of the NBN.”It’s an industry problem so we’re trying to balance our profits and losses and if you look at our numbers we’re still growing.”
In response Mr Teoh said he was looking to lift the sales of products that used TPG’s own infrastructure to cut down on costs. He added that TPG was speeding up the construction of its fibre-to-the-basement network, which actively competes against the NBN.
Forward dividend yield of 1.5% and PE of 26 both imply double-digit growth in earnings. This will depend on the effectiveness of TPG’s strategies to counter the NBN roll-out.
Source: TPG boosts profits 90pc