from today's Oz:
Washington Soul Pattinson backs TPG despite share fall
Washington H. Soul Pattinson chairman Robert Millner in Sydney yesterday.
Washington H Soul Patts’ dividend history
Listed investment company Washington H. Soul Pattinson has backed its massive investment in under-pressure telco TPG after the internet and mobile phone group lost 25 per cent of its value this week.
But while Soul Patts chairman Rob Millner, who already personally owns more than 7 million TPG shares, used the opportunity to purchase more scrip from the telco, the investment firm was more hesitant to load up on further cheap stock.
“We own 25 per cent of the business already,” Soul Patts chief executive Todd Barlow said. “We have some logistical constraints in buying more shares, but we’re not a seller, that’s for sure,” he said.
“We’ll monitor the situation. We don’t have a lot of cash at the moment. We’re fully invested across or portfolio.”
Australia’s second-oldest company, Soul Patts, owns and manages investments across coal- mining, pharmacy, telecoms and brick manufacturing and yesterday booked an earnings increase of 79 per cent to $149.4 million over the year through July.
The standardised “regular profit” rose a more modest 9.1 per cent over the same period, reaching $162.4m for the year.
While the year’s strong figures were aided by a 34 per cent lift in Brickworks shares and a 26 per cent rally in Pharmaceutical Industries stock, TPG was the jewel in the crown, up nearly 40 per cent over the period.
But the new financial year is off to a rough start. TPG has seen investors exit this week after it warned on Tuesday of a softer-than-expected outlook.
The group is facing the high cost of delivering data over the NBN which is squeezing margins across the telecommunications industry.
Shares in the David Teoh-controlled TPG are down 25 per cent this week, and many analysts have said the high fees charged by the NBN will weed out competitors from the industry.
But Mr Barlow stood by Soul Patts’ investment in TPG, which before this week’s plunge was valued at close to $3 billion.
“It’s hardly the case that NBN is putting people out of business,” Mr Barlow told
The Australian. “It’s an over-reaction by the market that TPG is going to struggle in an NBN environment.
“Once customers come on to TPG’s network they tend to stay. TPG has a very low churn rate and has a very high net promoter score and fantastic customer service. TPG will continue to grow.”
“TPG is the lowest-cost operator. We try to invest in businesses who are the lowest-cost operator in their field. The lowest-cost operator will always make money and always thrive over their competitors whatever the environment be.”
Soul Pattinson is now feeling the tailwind of a resurgence in thermal coal prices, and was trumpeting New Hope Coal’s purchase of the Bengalla project from Rio Tinto during the year.
“Most of the market was talking about the death of coal and we took a view different to that based on the fundamentals and we were rewarded for that — the spot price for thermal coal is up 50 per cent since we made that purchase,” Mr Barlow said.
Soul Patts declared a final dividend of 31c a share, taking the year’s total payout to 52c — a 4 per cent increase on the prior year’s distribution.
http://www.theaustralian.com.au/business/companies/washington-soul-pattinson-backs-tpg-despite-share-fall/news-story/34d27dd0172838050bb7dc1553a75b78#itm=taus|news|aus_authors_index|1|authors_storyBlock_headline|Michael_Roddan|index|author&itmt=1474611031576
