Last month MNF Group Ltd (ASX: MNF) reported its half-year results for the period ending December 31 2018. Below is a summary of the results with comparisons to the prior corresponding half year.
- Revenue of $98.1m, down 16%
- EBITDA (operating income) of $9.8m, down 16%
- Net profit of $3.1m, down 49%
- Dividend of 2.1cps, down 51%
- Earnings per share (EPS) of 4.18c, down 50%
- FY19 guidance for EPS between 15c-16.4c
- FY20 guidance for EPS between 20.4c to 22.4cps
The MNF Group share price fell around 10% on February 28 when it reported its full year results and I also sold down around 80% of my holding on the day unconvinced the group's valuation justifies a share price above $4.
In short, parts of its core business appear to be going backwards and I also remain unconvinced about the move into selling PennyTel mobile phone plans to older consumers in regional Australia.
As such I am kicking myself for not selling prior to the results and have decided to call time on MNF Group largely on valuation and operational outlook grounds. However, I do still think it has a strong founder-led management team and decent balance sheet.
The whole telecommunications, internet services and voice over internet sector has struggled recently with the likes of Telstra Corporation Ltd (ASX: TLS), TPG Telecom Ltd (ASX: TPM) and Vocus Group Ltd (ASX: VOC) on the nose.
Of course MNF is primarily an online voice and software business rather than NBN-facing internet services provider, but at $3.95 the stock still looks expensive to me given its latest update and guidance that relies on a significant turnaround out to June 2020.
It may well go onto perform well, but for me there are better market-beating opportunities available elsewhere.
One place I might have a look is among the three companies named below…
