UBS thinks TPG Telecom’s share price has not fully adjusted for the special dividend payment.
The stock appears to be trading at a premium to Telstra which UBS considers fair given that synergies will take time to achieve and the broker expects more growth from TPG in the near term.
Even so, the broker believes the magnitude of the premium is excessive. Valuation remains highly dependent on synergy assumptions.
UBS downgrades its rating to Sell from Neutral with its target price decreasing to $7.20 from $8.
Target price is $7.20.Current Price is $8.24. Difference: ($1.04) – (brackets indicate current price is over target). If TPG meets the UBS target it will return approximately -14% (excluding dividends, fees and charges – negative figures indicate an expected loss).