This top broker just rated the TPG (ASX:TPG) share price as a buy

TPG shares have just been rated as a buy by a leading broker.

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The TPG Telecom Ltd (ASX: TPG) share price has just been rated as a buy by one of the leading brokers that looks at ASX shares.

Brokers and analysts are always keeping a lookout for investments that could be attractive long-term opportunities.

Since the end of November 2021, the TPG share price has actually fallen by almost 10%.

The drop of the telecommunications business is being seen as an opportunity by some brokers.

A new buy rating on the TPG share price

It’s the broker Ord Minnett that now thinks that TPG is a buy. It is no longer ‘neutral’ on the business.

Remember that TPG is a much larger telco these days after the merger with Vodafone Australia.

Ord Minnett thinks that TPG shares are good value and it will do well as COVID impacts subsides.

There are a couple of different things that the broker noted.

Growth and monetisation

A retail telecommunications business can affect its operating profit in two different ways – the average profit margin generated from customers and how many customers it has.

Returning to mobile subscriber growth continues to be a key focus with new price plans and promotional activity across the company’s three major mobile brands – Vodafone, TPG and iiNet.

The ASX share is confident that its mobile business, which has been impacted by factors including COVID restrictions, will return to growth when Australian borders reopen and its 5G network reaches scale in the major cities.

Postpaid mobile subscriber declines started to flatten in the first half of TPG’s FY21, with the customer base ending the period at 3.19 million, a 1.8% decrease in the half-year.

The prepaid mobile subscriber base ended at 1.91 million, a 3.4% drop in the half-year.

In HY21, the total fixed broadband subscriber base increased to 2.2 million.

TPG is also seeing rapid early growth in its NBN alternatives with its 4G home wireless customer base more than tripling in the first six months of the year, and it’s building on the launch of its 5G home wireless option in June.

In terms of potentially selling assets, which Ord Minnett thinks could be a useful idea, TPG is going through a strategic review of its telecommunications tower assets.

The telecommunications ASX share operates a mobile network of 5,800 rooftops and towers, and owns the passive infrastructure on around 1,200 of those sites. The majority of those 1,200 sites are in metro areas and have a high average tenancy ratio.

TPG notes that demand for telecommunications infrastructure assets is strong, and TPG has commenced this review to obtain a preliminary market assessment.

While the company is continually seeking opportunities to maximise shareholder value, it has not made any commitment about these assets yet.

TPG share price valuation

According to Ord Minnett’s calculations, the TPG share price is valued at 32x FY22’s estimated earnings.

Should you invest $1,000 in TPG right now?

Before you consider TPG, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and TPG wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended TPG Telecom 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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