Is the MNF Group Ltd (ASX:MNF) share price a buy after making a Singapore acquisition?

The MNF Group Ltd (ASX: MNF) share price has recovered this afternoon after announcing an acquisition in Singapore. MNF is acquiring SuperInternet in Singapore for S$2 million.

As a reminder, MNF is a leader in providing voice over internet protocol (VoIP) services, some of its customers include governments, Skype and Uber.

MNF said that SuperInternet is a niche operator that is Singaporean Government certified, with potential for new revenue in the near future. It is generating around S$1.6 million of revenue and is earnings before interest, tax, depreciation and amortisation (EBITDA) break even. MNF will pay S$2 million for SuperInternet.

The management of MNF plan to upgrade the existing SuperInternet network infrastructure with its software eco-system. SuperInternet currently has a team of 10 full-time staff.

The acquisition is scheduled to complete before 31 July 2018, so it’s likely this will occur in FY19, not FY18.

As part of the acquisition, MNF will get a fully interconnected voice network infrastructure, a full national interconnection with NetLinkTrust (the Singapore NBN) and extensive domestic dark fibre transmission within the Singapore CBD.

This acquisition will allow MNF to offer services to existing and new wholesale customers. It will be funded by is existing acquisition facility.

MNF’s CEO, Rene Sugo, said “The acquisition of SuperInternet in Singapore provides MNF a rapid entry into the complex Singapore market and is part of MNF’s regional expansion strategy into Asia.

“This will allow the company to replicate its highly successful Australian and New Zealand based next-generation high margin recurring revenues in this additional market for consistent long-term growth and innovation potential.”

Foolish takeaway

This seems like a solid buy by MNF and a fairly cheap way to enter the Singapore market. Some investors seem to have gone negative about MNF in recent times due to its Pennytel investment, but the rest of its business is growing at a pleasing rate.

I’d be happy to buy some shares at the moment, as it’s only trading at around 22x FY18’s organic earnings per share (EPS).

However, if you’re not sold on MNF then I’m sure one of these top shares will fill your investment criteria.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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