Utility group Telecom Plus a ‘buy’ following share price drop say brokers

15th October 2014


Brokers are getting behind utility provider Telecom Plus with its shares currently rated a ‘strong buy’ according to the market consensus.

The firm, which provides a wide range of utility services across both the communications and energy markets, owns and operates the Utility Warehouse brand which provides more than 370,000 UK homes and small businesses with broadband, gas and electricity – as well as phone services.

This month according to Digital Look, analysts at Peel Hunt and FinnCap reiterated respective ‘buy’ recommendations on the stock while The Share Centre has added the group to its own ‘buy’ list.

While the FTSE 250 constituent’s share price has declined by around 30% this year reflecting the trend in mid cap growth stocks; The Share Centre’s Graham Spooner believes the fall presents investors with an attractive entry point.

He said: “Earlier in the year the company reported a 25% rise in adjusted profit alongside a 15% increase in new customers. Most importantly the proportion of customers taking the entire package of services doubled, which in turn improves the visibility and quality of earnings.

“The group provide an alternative to the usual well known utility suppliers for gas, electricity, telephone and broadband services. Compared to its competitors the forecast revenue for the year of around £800m is tiny, but set to grow through its Utility Warehouse brand.”

The firm’s past growth record and strong return on capital profile has not gone unnoticed and it has resulted in a premium rating relative to the sector added Spooner.

He said: “A prospective PE (price / earnings ratio) of 19 falling to 16.7 for 2016 may look rather high, but this is one of the few companies that can expect significant earnings growth along with market share and customer numbers.”

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