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Why Telecom Plus PLC Shares Rocketed

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares in Telecom plus (LSE: TEP) soared by more than 15% in early trade this morning, following the announcement of a new supply agreement with Npower.

So what: Telecom Plus has agreed to acquire the entire issued share capital of Electricity Plus Supply Limited and Gas Plus Supply Limited from Npower for £218m, and as part of the acquisition, enters into “a new 20-year energy supply agreement with Npower which will substantially increase the energy margins available to Telecom Plus, and enable it to provide even more competitive tariffs to its customers”.

Now what: This is a significant move for Telecom Plus, which already supplied a wide range of utility services, but the acquisition will provide a massive boost to its growth potential — already, it has claimed that the ‘big six’ energy providers is about to become the ‘big seven’.

The acquisition is being funded by a share placing and open offer of shares, with the price set at 1,475p and available to shareholders on the basis of one new share for every 35 held.

Furthermore, management lifted the interim dividend by 23.1% to 16p, putting the forecast yield at 2.4%%, giving shareholders extra cause for optimism.

 

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Investors who were eyeing up a stake in the company but hadn't got around to it will be less pleased, however. Still, our team of top analysts have highlighted a share that they believe has yet to fulfill its growth potential, and produced a special report in which we evaluate its finances, risks and growth prospects going forward. 

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> Sam does not own shares in Telecom Plus.