[VIDEO ANALYSIS] Is TPG Telecom (TPM) oversold?

William O'Loughlin:

Okay, next question. Steven from New South Wales asks, "Do you think TPG Telecom is currently oversold?" So, TPG had quite a big drop in share price late last year. My view is that the selloff might be a little overdone, but I wouldn't be expecting a sharp rebound. If anything, you could have a gradual recovery there, but the sector is facing difficulties at the moment. There's increasing competition, there are smaller players that are taking a market share from the bigger players, and these companies are also realising lower profit margins on the NBN.

 

Shannon Rivkin:

Which is a huge concern.

 

William O'Loughlin:

Yeah. And there's still a degree of uncertainty there regarding the NBN. The other thing I read recently that was that Vodafone is set to enter the NBN market in 2017. They already have a huge base of mobile subscribers, so they could be a significant threat in that area. The current trailing P/E of TPG is around 14 times, might be a little bit low, but that probably does factor in those issues there.

 

Shannon Rivkin:

That's the lowest it's been though for a long time. At least, I think finally you're seeing in the price the reflection of the current issues, but as you saw from Telstra's update, it doesn't really feel like any of them have got the handle on it yet.

 

William O'Loughlin:

Right.

 

Shannon Rivkin:

Which is why I think they all come with risk, even though they all offer exciting prospects if they do get on top of it.

 

William O'Loughlin:

Yeah.