The TPG Telecom Ltd (ASX: TPG) share price has edged lower on Monday.
In afternoon trade, the telco giant's shares are down 0.5% to $6.07.
This means the TPG Telecom share price is now down 19% since this time last year.
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Is the TPG Telecom share price good value now?
Although the TPG Telecom share price has come under significant pressure over the last 12 months, one leading broker still doesn't see enough value on offer to recommend its shares as a buy.
According to a note out of Goldman Sachs this morning, its analysts have retained their neutral rating but lifted their price target on its shares by 3% to $6.30.
Based on the current TPG Telecom share price, this implies modest upside of 3.8% over the next 12 months.
What did the broker say?
Goldman notes that despite the deterioration in its enterprise revenues, TPG Telecom has aspirations to achieve $1 billion a year in business revenues by 2025 as part of its post-merger new enterprise strategy.
This target implies a 7% revenue compound annual growth rate across 2020-25 versus the ~$700 million business (non-wholesale) revenue it delivered in calendar year 2020.
Goldman appears to have a few doubts that TPG Telecom will achieve this. But even if it does, the broker expects softer margins to undo a lot of the good.
It explained: "We would expect even if TPG is successful on building its $1bn business revenues, the corresponding EBITDA is likely to be less significant than would have historically been the case. Given this and the execution risk on achieving $1bn p.a. in revenues (given ongoing NBN aggression, HyperOne build, Telstra adaptive networks launch and superior 5G coverage) we are cautious on TPG's outlook."
In light of this and other risks, it believes investors should keep their powder dry for the time being.
Goldman concluded: "We continue to see: (1) mobile subscriber headwinds (following underperformance vs. industry in recent halves); and (2) risk of shareholder churn (noting remaining escrows expire in 2022), as key overhangs for the name, while also acknowledging potential support from: (1) upside from Tower monetisation; (2) greater leverage to the roaming recovery; and (3) improved enterprise mobile/fixed offerings enabling share gains. Hence we remain Neutral, with our 12m TP +3% to A$6.30 driven by lower than expected spectrum payments (driving FY21-23E EPS +5% to +10%)."
