TPG Goes Ex-Dividend

TPG Telecom Ltd (ASX: TPM) share price plunged this morning after the company recently posted its full year financial results, it was trading at a price of $7.770 as at October 15, 2018. TPG Telecom Limited has also witnessed a performance change of 55.35% over the past 1 year.

For the current financial year, the company’s management believes EBITDA, will fall to between $800 million and $820 million. The company also declared a dividend of 2 cents with dividend ex-date as October 15, 2018 and dividend payable date as November 11, 2018 which takes the fully year dividend to 4 cents a share compared with the 10 cents it paid the year before. With the franking included, the total yield is at 0.7% which is not appealing in the eyes of income investors. By way of an inspecie distribution of shares, TPG also intends to separate its Singapore mobile operations. 

An enhanced ability to invest and innovate in a highly competitive telco market, Merger will deliver increased scale to support future growth. With strong cash flow generation and a combined enterprise value of $15.0bn, strengthened combined balance sheet with ~2.2x Net Debt / EBITDA. Adjusted for one-off restructuring costs and certain non-cash items, improved balance sheet strength and financial position with an expected investment grade credit profile and an intended initial dividend payout ratio of 50% of NPAT.

Provided that TPG’s Net Debt balance at that time is below the agreed target Net Debt of $2,024m, TPG may distribute a fully franked Cash Special Dividend near implementation of the merger, as part of the Merger which the parties have agreed upon. Following satisfaction of key conditions precedent, the TPG Board’s current intention is to declare the Cash Special Dividend. The level of cash that is used to capitalize TPG Singapore, the final Cash Special Dividend will also be reduced by.

In anticipation of the merger with Vodafone Austrtalia, TPG may be taking its foot off the gas on capex, which is expected to bring for both parties significant cost savings. it seems TPG posted a decent result but even at this price it does not offer much value. On valuation terms Telstra turns out to be a better bet.

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