“Given the acute execution risk in Australia, TPG has limited capacity to pursue an overly aggressive and disruptive strategy to gain market share in Singapore,” Koh says in a Monday report.
Already, growth has been slowing for TPG. It posted earnings growth of just 5.7% year-on-year in FY17, compared to a 60.6% increase in FY16 and a 28.2% growth in FY15.
In addition, TPG cut its final dividend for FY17 to 2.0 cents, from 7.5 cents a year ago.
And Koh believes TPG’s financial performance is likely to worsen in FY19 on the back of start-up losses from mobile operations in Australia and Singapore.
On top of heightened competition with the impending entry of TPG in 2H18, Koh says the incumbent telcos will also have to contend with higher handset subsidies caused by the launch of iPhone X.
“However, these near-term headwinds appear to have been priced in,” he says.
As such, UOB is keeping its “overweight” rating on the Singapore telco sector. “The telecommunications industry in Singapore could consolidate from four to three players over the next 3-5 years,” Koh adds.
The brokerage has “buy” recommendations on M1 and SingTel, with target prices at $1.98 and $4.53, respectively.
“Yield-oriented investors should also consider NetLink NBN Trust,” Koh says. UOB has a “buy” call on NetLink NBN Trust with a target price of 93 cents.
As at 3.01pm, shares in M1 are trading half a cent lower at $1.79, shares in SingTel are trading 3 cents higher at $3.71, and units in Netlink NBN Trust are trading flat at 83 cents.
