Investors may have an opportunity to snap up discount shares in major growth company M2 Group Ltd (ASX: MTU) over the next few weeks. M2 shares closed down 6.01% on Friday after major shareholder Larry Kestleman sold over half of his 6.9% stake in the communications group.
Mr Kestleman was given the shares following M2's purchase of the Dodo and Eftel companies that he founded. The sale could prompt other major shareholders to offload stakes in order to lock in profits after a 30% climb in the share price over the past six weeks.
Bargain Buying
While the share price is still 26% higher than it was three months ago, M2 could actually be good value at the current price for long-term buyers. M2 surprised analysts with an exceptional earnings report in August that prompted the recent surge in share price.
Revenue topped $1 billion for the first time while profit jumped 50% and the final dividend payment rose by 45%. M2's strategy of expansion via acquisitions appears to have been successful and analysts expressed delight at the ability of management to integrate the new businesses in 2014.
About
M2's stable of brands includes Commander (business products), Engin (VOIP services), iPrimus (phone and broadband) and Dodo (phone and broadband). I have been impressed by the vision of management to expand into the energy market, which the group is using to cross-sell telecommunication products through the Commander brand.
Outlook
Analysts are expecting another 11%-14% growth in earnings per share over the 2014-15 financial year. This equates to a forward price-to-earnings ratio around 13 and a 3.9% fully franked dividend yield at the current price.
10% yield over 13 months!
Here's an interesting idea: Investors that buy shares before October 7 will be lucky enough to receive three dividend payments over 13 months, representing a yield of between 5.8% and 7% depending on next year's payout.
These payments should remain fully franked and thus correspond to a gross yield of between 8.3% and 10%.
