5 ASX telco shares this expert loves right now

Wilson Asset Management reveals 3 different themes it’s betting on in the telecommunications sector

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Young woman using computer laptop smiling in love showing heart symbol and shape with hands. as she switches from a big telco to Aussie Broadband which is capturing more market share

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The COVID-19 pandemic triggered some lifestyle changes that will stick with us permanently.

One of these revolutions is working from home. 

Already many companies have indicated they would adhere to a “hybrid” model going forward — come into the office one or two days a week and telecommute the rest.

It’s no wonder that residential internet connections have become even more critical than they already were before the coronavirus first arrived.

Wilson Asset Management equity analyst Sam Koch certainly thinks there’s huge growth potential in the telecommunications industry.

“The sector’s been on a tear recently,” he said in a Wilson video.

“We believe that investors are attracted to the organic and inorganic within the sector at the moment.”

Koch said there are 3 ways that ASX telco companies are growing, and named 5 shares that fit the bill for his team:

3 ways ASX telecommunications companies are growing

The first way telcos are growing is through “rapid organic expansion into new markets”.

Koch named Tuas Ltd (ASX: TUA) and MNF Group (now known as Symbio Holdings Ltd (ASX: SYM)) as two businesses exhibiting this growth.

Tuas is going gangbusters, with its stock price soaring 16.49% higher on Friday. The shares have now gained a stunning 201% for the year so far.

Symbio shares aren’t going so badly either, returning 60% for the year so far.

The second growth strategy is through mergers and acquisitions, according to Koch.

“These are companies that are rolling up a fragmented space, which is Swoop Holdings Ltd (ASX: SWP) and Aussie Broadband Ltd (ASX: ABB).”

Aussie Broadband has been one of the darlings of the ASX in 2021, returning around 150% since the start of the year.

It dropped 3.65% on Friday to close at $5.02, which could present a buying opportunity, according to Shaw and Partners portfolio manager James Gerrish.

“We think that’s a clear, outstanding ‘buy’ around that $5.20 mark,” he said in a Market Matters video.

“It’s certainly a stock that we like in the portfolio.”

The third way the Wilson team is investing in the telco sector is betting on turnaround stories like Superloop Ltd (ASX: SLC).

“Superloop is an interesting one. It’s backed by Bevan Slattery, who is a doyen in the telco sector,” said Koch.

“They’ve sold 2 of their underperforming assets in Hong Kong and Singapore at a 30% premium to the book value.”

He added the proceeds from that sale will be re-invested in a way that’ll be beneficial for investors, by way of “capital management or accretive acquisitions”.

Superloop shares have gained 20% for the year to date.

Motley Fool contributor Tony Yoo owns shares of Aussie Broadband Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Aussie Broadband Limited and SUPERLOOP FPO. The Motley Fool Australia has recommended Aussie Broadband Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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