I know there's an existing thread for TEP, but I'm blowed if I can find it.
Anyway, things aren't looking too good for this share at the moment. Been on a downward spiral for some weeks, after hitting over 4.
Very low volume today, and sells seem to equal buys, so why the continuing drop? Seriously thinking of getting rid, and taking what is now a very small (and I mean small!) profit.

Any experts on TEP like to add their two pennorth?

Princess

Sorry guys if this has already been posted as it is an old article but neverthless an intresting read. It was rated as a hold when it was 300+.

Telecom Plus gas concerns are mostly hot air
Published: 12:36 Wed 9 June 2004
By Joanne Wallen, Associate Editor (Citywire)

Those looking for the negatives in Citywire tip Telecom Plus' results today will spot the margin squeeze in the multi-utility company's gas business, but there are enough positives to outweigh this issue.

Chief executive Charles Wigoder told Citywire that since the wholesale price of gas has risen pretty much in line with oil prices, Telecom Plus (TEP) and all of the other residential gas companies are to some extent having to swallow decreased margins, since they cannot possibly pass on the entire hike to customers in one hit.

Wigoder said the gas companies would 'create a political storm' were they to increase prices to customers by 20-30% in one hit. What will happen instead is that prices will rise more steadily this year and next, and that margins will catch up in the longer term.

Not that Wigoder is overly concerned. Gas represents only a very small part of the business, which offers customers electricity, fixed telephony, mobile telephony and internet services as well. Margins in all of the other businesses remain, 'extremely satisfactory.'

Depending on where the commodity price of gas ends up this year, there could be a 1-2 million impact on Telecom Plus' profits. This is not insignificant for a company that in the year to March had profits of 10.6 million, up 90% from last year on turnover up 41% at 81.8 million.

However Wigoder points out that if Telecom Plus is feeling a little pain, the other utility companies are feeling a whole lot more. This is because Telecom Plus prides itself on having by far the lowest cost base and cost of customer acquisition of any of its competitors, and because it reckons it is by far the most efficient of the players.

'I'd be ashamed to call myself a businessman if I couldn't run a business more efficiently than the former monopolies. But we are an order of magnitude more efficient,' said Wigoder. Not that Wigoder should be ashamed to call himself a businessman anyway. He was after all the founder of The People's Phone Company, which he sold to Vodafone in 1996 for 77 million.

Earnings per share to March were 12.2p up from 6.8p and the company is paying a final dividend of 5.5p making a total of 10p for the year, up from 5.75p.

The number of subscribers increased by 33% to 178,000 and the number of services provided rose by 39% to 312,000. This reflects the company's success in selling more than one service to each customer Customers are recruited by agents or 'distributors', who basically sign up their friends and acquaintances in a sort of multi-level marketing arrangement, hence keeping the costs low. In the last quarter alone the company signed 1,500 new distributors, taking the total to 13,000.

Telecom Plus shares are down 10.5p at 313.5p.

Citywire Verdict:
We tipped the shares in May 2002 as a good buy at 109.5p and suggested taking a 'careful look' at whether to book some profits at 268p last November.

Clearly the gas margins have shaken investors this morning. However house broker KBC Peel Hunt has left its estimates unchanged. While it will wait to see how the next six months pan out in terms of gas prices, it thinks the company's 'visibility, yield and track record,' make it still an attractive investment.

At the current price shares are rated at 20 times this year's forecast earnings falling to 16 times next year. The prospective dividend yield is 3.85%.

It may not be the right time for new money, but with the dividend and the general outlook it should be reasonable to hold for now.

Azhar - sorry I don't know about other tips in the IC, I don't get it - I just noticed the Tplus recomendation on MoneyAM site under friday's newspaper comments round up.

Decent volume going through. Up and awaay slowly but surely.

azhar and Tplus Guy

Very interestin contributions. The article was a good summary, recommending hold at 300p plus. The price has withered for lack of news plus larger investors taking profits.

I think that today's trading is very instructive and proably typical. Excluding some early trades which are not on MoneyAM's list, there were 37 buys with average volume of 1100 shares and 13 sales of average volume 10,500 shares. I suggest that most of the former are TEP distributors, possibly investing their income; the latter are larger investors who are not as close to the action. To repeat a point already made, the gas problem is probably already going away. Taking what might be a pessimistic view of a shortfall of 2 mill. on profits, this will reduce a projected 4m increase in profits. PE will still drop to 16 and 2005 profits should make good the shortfall.

Its worth taking good not of Tplus Guy's comments because I believe him to be representative of TEP distributors. They do really understand network marketing and the cumulative effect of new distributors, also the policy of adding other income streams. TEP is not just telephone, or just utilities, it is a network marketing company whose primary asset is its distributors. Some fall by the wayside (like me) but there are many who are doing very well thank you and are, or expect to, making a good pile. Stupid writing positive stuff when I am out of the share at present, but I am benefiting from the exchange of ideas while I wait for ASOS to start getting over-cooked and then doing some switching, including TEP.

Eric

Another tick up guys. A massive spread tho. I think the big spread keeps away T traders which suits me fine as I'm a medium to long term holder.

yet another day with a decent rise. Is there something happening in the background ?

azhar
Tplus Guy will hopefully comment. From my own experience of TEP, we are moving into the time of year when distributors are thinking about performance - the forthcoming Express Day is the big booster day of the year. The buying volume is not that significant but there are a lot if them - I suspect these are mainly distributors wanting a stake in their own company before the trading statement. My earlier comment was that TEP had fallen below their long-term trend line - they should not be below 300p, as instanced by Director buying at about that level.
Eric

Projected PEg of .8 Projected Yield about 5.5 can't be bad. TA looks promising. Should help fill a few Xmas stockings.

Yes your right Azhar,,biggest event of the year coming up for the execs always gets our juices running which in turn promotes growth..What i wonder will they come out with this year??

Another rise. it certainly is looking promising.

Looks like its on the road to recovery,,hope you all held tight!!!

Still here TPlus Guy, Always new it was undervalued when it double bottomed <240s. Bought in and hold medium to long term. I couldn't find anything negative to justify the low price which is the reason why I bought in. To be honest IC did the trick to make everybody realise.

WOW!!! It's certainly motorimg now! Anybody know why, after such a long time in the doldrums?

IC article did the trick but it was well undervalued based on figures

azhar - thanks. Sorry, I didn't read your previous post. DOH!!

Princess,,i hope you held tight!!! Express day is round the corner and i can only guess at what is going to happen this year,,new services i hope??? I think it should steady out over 3 after that..

Tplus Guy

Not sure why it should steady out. Fundamentals are very good: PEG Factor, Price to Sales, even growth in yield. A key factor is whether the 40% sales growth is maintained; there was a big jump last year in profit and we know that, whilst gas has held up profitibility this year, that is temporary. So that underscores a steady rise until the results - any new positive news should just accelerate progress towards the 4 achieved last year.

Eric

Id like to agree with you EW but i havent seen any figures recently of customer and exec growth..But i will be at express day and will tell all on my return.

profit takers moving in. I was expecting that it would now stabalise around 300 until further news from express day etc.. but it is now retracing. Are we heading back to where we started i.e. 240s? Any views

azhar

I see there is no comment to your query a couple of days ago. It seems that the rise was triggered by the IC article. Transactions are just a trickle - if the sells outweight the buys the mm's just mark it down to attract the buyers back in. I think the share is just meandering around waiting for some positive (or negative) news. Tplusguy reports that distributer expectancy is high and expects a positive move on express day next month. As a medium to long term holder, don't worry. I would prefer it to stay down for a while to allow other announcements to get out of the way before I commit some funds.

Eric