Small Caps | Jun 10 2021
A refinement to the MNF Group business has been welcomed, with the opportunities in wholesale voice services now firmly in its sights
-Post Direct sale, MNF Group becomes largely a wholesale services provider
-Potential to be a leader in wholesale voice in Asia-Pacific
-Brokers see a significant value opportunity opening up
By Eva Brocklehurst
Several catalysts have combined for MNF Group ((MNF)) recently, and the company's latest announcement highlighted the opportunities, with brokers welcoming the news and flagging an even more bullish outlook for the stock.
MNF Group has refined FY21 earnings guidance, maintaining the $40-43m range but now anticipating earnings will be in the top half, on top of announcing the divestment of part of its Direct business to Vonex ((VN8)).
The retail and small-medium business segment will be divested while enterprise and government segments, which Morgan Stanley estimates provide around $8m in revenue, will be retained along with the brand MyNetFone.
The sale will make the business a largely wholesale offering with the remainder of the Direct business making up just 5% of group operating earnings (EBITDA). Morgan Stanley notes the market wanted this divestment as the divested business is a lower-growth segment. The broker believes the sale has been executed at a reasonable multiple.
Vonex will enter an exclusive wholesale supply agreement and this is expected to provide $3m per annum in long-term revenue for MNF Group. Moelis agrees the sale is a positive outcome, helping to re-position MNF Group as a higher-growth, higher-quality company.