Overview: MNF Group Ltd (“MNF Group”, “the Company”), formerly My Net Fone Limited, is an Australian technology company providing internet-based telecommunication services. MNF operates IN three divisions being Domestic Retail, Domestic Wholesale, and Global Wholesale offering Voice over Internet Protocol (‘VoIP’) data and video services to residential and business enterprises. MNF Group listed on the ASX in 2006.
Catalysts: MNF Group has increased revenue every year since listing in 2006 and over the past five years revenue has grown at a compound annual growth rate of 64%. Growth is achieved through a mix of organic expansion and acquisitions and continuation of this trend is the major value driver. MNF Group has consistently paid dividends and rising earnings could allow for higher distributions in the future. Management has a proven track record of value creation within the industry.
Hurdles: As management targets growth via acquisitions, MNF faces integration and funding risks. There is no guarantee that the required capital can be procured, nor that acquisitions will yield a return on shareholder funds. MNF operates in a mature market and there is a risk that the market reaches saturation at a cyclical peak.
Investment View: MNF Group offers profitable exposure to demand for internet and cloud-based telecommunication services. We are attracted to the company’s growth trajectory, ability to distribute dividends, and management track record. Integration and market saturation risks are primary hurdles. MNF Group’s share price appreciation has been driven by consistent revenue and earnings growth and acquisitions have been well integrated to date. Attracted to the Company’s unique position in the market and recognising the MNF Group’s growth potential we initiate coverage with a ‘buy’ recommendation.
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