Credible player in big market: MNF Group Ltd (ASX: MNF) has been awarded with the best voices and PBX Provider of 2017. It was also awarded the Best Global Voice Service Company as per APAC Insider NZ Business Awards. The group performed well in all its segments and its Domestic Retail revenue was up by 11% for FY17 over FY16. Its Domestic Wholesale growth is fully organic and is mainly of high value on recurring business, moreover if we talk about the per segment gross margin, the Domestic Retail margin was up by 25% for FY17 as compared to FY16 and the Global Wholesale performed in line with the expectation with the full year margin growth of 15%. It prepared a forecasting model for FY18 which was based on 100% organic growth. MNF forecasts that its NPAT and EPS for FY18 will increase by 24% and 18%, respectively, over FY17 figures. The group declared an annual dividend of 8.25 cents per share fully franked which is an increase of 18% over the previous year and the dividends are consistent with its track record of providing unwavering returns to the shareholders in the order of 50% of NPAT. The key aspect to note is that the group has become the “go-to” specialist for voice services in Asia-Pacific region at the back of continued development in infrastructure and building relationships in the region.
 

Performance Trend (Source: Company Reports)
 
Recently, MNF Group announced an agreement with BroadSoft, Inc which is a global leader in cloud business software for unified communication as a service and a provider of collaboration and contract centre as a service to provide UCaaS services in Australia and New Zealand on BroadCloud and MNF Symbio Networks. MNF Group’s subsidiary MyNetFone, will market a full suite of voice and team collaboration services which will be based on the BroadSoft Business UC-One application to Enterprise and the Government customers which will commence in the first calendar quarter of 2018. Post-acquisition of CCI, the group has reported that CCI performed marginally ahead of expectations in the 5 months to June and as expected this acquisition has been EPS accretive in FY17. Now, MNF Group has shown an ability to find value of the accretive acquisitions and integrate them quickly and effectively to improve the overall performance of the business; and with this discerning and conservative approach, MNF Group will continue to actively look for further acquisition opportunities while the company remains totally committed towards its organic growth and towards its financial performance.

The new domestic voice network is ready for launch in New Zealand during the third quarter. Further, iBoss for UFB and other products are expected to follow in early FY19. Further, pending POP upgrade in NZ is planned for fourth quarter of FY18. New POP deployment in Australia is being planned for launch in FY19. The stock price has increased by 57.6% in the past six months (as at January 10, 2018); and given the ability to maintain earnings per share growth, we give a “Hold” recommendation on the stock at the current price of $6.85

 
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