Rapidly-growing telecommunications company, TPG Telecom Ltd (ASX: TPM), today announced yet another strong half-year result.
In the six months to 31 January 2015, TPG reported an 18% increase in net profit after tax, or NPAT, to $106.7 million, on the back of total revenue of $627.3 million, up 59% on the prior corresponding period.
Earnings before interest, tax, depreciation and amortization, or EBITDA, was up 43% to $236.2 million.
Pleasingly, robust free cash flow of $102.9 million and a jump in earnings per share enabled the board to announce a 22% increase in the company's interim dividend. The 5.5 cents per share fully franked dividend will be payable on 19 May 2015.
TPG said organic broadband subscriber growth helped boost the Consumer Division's EBITDA 16.9% to $117.1 million. Indeed the group added an additional 38,000 subscribers, taking TPG's total broadband subscriber base to 786,000 and a further 342,000 mobile subscribers.
TPG's Corporate Division also grew strongly in the half, achieving EBITDA of $117.7 million, up 82.5%. However, the prior period result did include $5.6 million of non-recurring benefits.
The company said a large component of the EBITDA result was due to the acquisition of AAPT during the second half of 2014.
With a total debt balance of $320 million at reporting date, TPG said its debt to annualised EBITDA was less than 0.7 times. However, following on from its recent announcement to acquire rival internet subscriber, iiNet Limited (ASX: IIN) for $1.4 billion, that ratio will likely balloon out to 3.1 times.
Should you buy TPG shares today?
Looking ahead, TPG has upgraded its 2015 financial year EBITDA guidance roughly 5.2%, to between $480 million and $483 million, implying annual growth of approximately 32%.
Whilst TPG shares may appear expensive at their current price of around $8.83 (representing a price-earnings ratio of 32), if it can meet guidance in 2015, pay a good price for the iiNet acquisition and extract the expected synergies, then its current share price will likely prove to be justified.
