Teleperformance: In-line organic & stable margins; reiterated outlook requires H2 growth acceleration

Research evidence excerpt

Teleperformance: In-line organic & stable margins; reiterated outlook requires H2 growth acceleration

Forecast returns

Forecast price appreciation -9.8%

Forecast dividend yield 7.1%

Forecast stock return -2.7%

Market return assumption 7.9%

Forecast excess return -10.6%

Company Description

TP, founded in 1978, is the global market leader in outsourced customer experience (CX)

services, with c10% market share. Core Services (i.e. contact centres) represent c70% of

EBITA, but over time the company has expanded its offering of Specialized Services (c30% of

EBITA) such as interpretation/translation and visa processing. Telcos is still a relevant end-

market but the group has increasingly diversified into other verticals such as financial services,

retail, media and entertainment, as well as entering entirely new service lines, such as Trust &

Safety for internet clients (c10% of Core Services revenues).

Valuation Method and Risk Statement

Our price target is DCF-based (WACC of 12.5%, Long term growth rate of 0%). Risks to our

investment thesis for Teleperformance include: 1) Client risk: Teleperformance now provides

services for more than 1,000 customers and has improved over time its client diversification.

However significant exposure to fast growth segments such as the e-economy, while

attractive, does bring with it some risk of insolvencies. 2) The pricing environment remains

tough. Teleperformance has now expanded its offshore capacity, which should meet the

client pricing requirement in a potential deflationary environment. Wage inflation in the

emerging markets may also represent a risk. 3) Regulatory risks: Teleperformance suffered

significantly back in 2003, from strict regulation in the US call industry- specifically pertaining