Why the MNF Group share price rocketed 12.5% higher today

The MNF Group Ltd (ASX:MNF) share price was on fire on Tuesday. Here's what sent its shares 12.5% higher…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The MNF Group Ltd (ASX: MNF) share price was a very strong performer on Tuesday following the release of its full year results.

The communications software specialist's shares finished the day 12.5% higher at $4.32. 

What happened in FY 2019?

For the 12 months ended June 30, MNF Group reported a 2.3% decline in revenue to $215.6 million, but an impressive 89% lift in recurring revenue to $73.6 million. The latter now accounts for 34% of its revenue, compared to 18% a year earlier.

Thanks to this positive shift in its revenue mix, which led to a material improvement in its gross margin from 31% to 38%, the company was still able to grow its profits despite the revenue decline.

MNF Group posted an 11% lift in earnings before interest, tax, depreciation and amortisation (EBITDA) to $27.2 million and underlying NPAT-A growth of 13% to $15.9 million. Underlying EPS-A growth came in 12% higher year on year to 21.7 cents per share.

Looking ahead, while the likes of Telstra Corporation Ltd (ASX: TLS) and TPG Telecom Ltd (ASX: TPM) continue to have their margins squeezed by the NBN, management believes it has unlocked a large recurring revenue opportunity as copper networks are replaced by VoIP services.

Combined with a shift to unified communications in the cloud (UCaaS), management believes the company is well-positioned for long term growth.

Especially given its plan to expand its network and platform into Singapore and other South East Asian countries including Brunei, Cambodia, Indonesia, Lao, Malaysia, Myanmar, Philippines, Thailand, Timor-Leste, and Vietnam.

Combined with Australia, New Zealand, and Singapore, these countries give MNF Group a 650 million (person) market opportunity.

In the near term, though, the company has reaffirmed its FY 2020 EBITDA guidance of $33 million to $36 million. This guidance equates to year on year growth of 21.3% to 32.3%.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended MNF Group Limited and Telstra 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.

More on Share Gainers

A man looking at his laptop and thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a disappointing hump day session for the ASX today.

Read more »

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX managed to bank a small rise this Tuesday.

Read more »

Sport trainer talking to little girl who is climbing wooden ladder in gym.
Share Gainers

Why Vault Minerals, Droneshield, Westgold Resources shares are climbing higher today

These shares are gaining on Tuesday, but why?

Read more »

A young woman smiles as she rides a zip line high above the trees.
Financial Shares

5 best ASX 200 financial shares of FY25 (CBA didn't make the cut!)

These stocks were well and truly 'in the black' for share price growth last financial year.

Read more »

Excited group of friends sitting on sofa watching sports on TV and celebrating.
Share Gainers

Why Amaero, Black Cat, Domino's, and Ramelius shares are racing higher today

These shares are having a good session on Tuesday. But why?

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a rough start to the trading week for investors this Monday.

Read more »

two computer geeks sit across from each other with their laptop computers touching as they look confused and confounded by what they are seeing on their screens.
Share Gainers

ASX tech shares outperformed US tech stocks by 2:1 in FY25. Here's why

Forget the Magnificent 7! Aussie tech shares had twice as much price growth as US tech stocks in FY25.

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Share Gainers

Why Bellevue Gold, Cobram, Hub24, and Nanosonics shares are pushing higher

These shares are starting the week on a positive note. But why?

Read more »