Why the Vonex (ASX:VN8) share price surged 10%

Shares in the telecommunications company have jumped with its latest purchase.

| More on:
A woman standing in a blue shirt smiles as she uses her mobile phone.

Image source: Getty Images

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 Vonex Ltd (ASX: VN8) share price went flying today. At the close of trade, shares in the telecommunications company were selling for 16 cents each – up 10.35%.

The substantial price movement comes after the company announced a new acquisition.

Let's take a closer look at today's news.

The Vonex share price is rising

In a statement to the ASX, Vonex says it has agreed with MNF Group Ltd (ASX: MNF) to purchase part of its Direct Business for $31 million.

According to Vonex, the Direct Business "sells cloud phone, internet and mobile services directly to small and medium enterprises [SMEs] and residential customers in Australia, as well as [having] a dedicated audio and video conferencing business."

In 2020, Direct's revenue was $15.6 million – 89% of which came from its business customers. Direct's earnings before interest, taxes, depreciation, and amortisation was $5 million in 2020.

Vonex says the transaction will "materially" expand its presence with Australia's SMEs and retail customers. The company claims it will acquire just over 5,200 business customers through the transaction. It also says today's purchase will allow it to expand its presence in Melbourne.

Vonex will pay $20 million upfront to MNF while the remaining $11 million will be deferred and payable in 12 monthly instalments after completion of the deal. Vonex expects the deal to be finalised at the end of next month.

The business will enter into a new debt facility to meet the upfront payment then expects future revenue, with some debt and/or capital raising, to pay the instalments.

As well as the jump in the Vonex share price, MNF Group shares have also been buoyed by today's news. They've closed the day 7.58% higher at $5.33.

Management commentary

Vonex Managing Director Matt Fahey said:

We would be delighted to welcome MNF's Direct Business and its customers to the Vonex group. As the new 'work from home' paradigm has become part of life for more Australians, we have increasingly focused on providing Australian SMEs with telco services that are reliable, affordable, flexible and scalable.

Migrating and integrating the Direct Business with our own will bring us a meaningful national footprint and help us to gain the scale through which we can continue to deliver strong value to customers and investors.

MNF Group CEO Rene Sugo added:

The divestment of these direct businesses is in line with our strategy to simplify MNF's business and drive growth in Communications Platform as a Service (CPaas) and Unified Communications as a Service (UCaaS) services. Importantly, funds from the sale will be reinvested into our growing wholesale business and our expansion offshore. Assuming all conditions are met, we expect the sale to be completed by the end of July 2021.

Vonex has been a long-term partner to MNF Group, and we have been very impressed with their technical capability and detailed migration plan. This was a significant factor in our decision to select Vonex to acquire the Direct Business.

Vonex share price snapshot

Over the past 12 months, the Vonex share price has increased by 52.4%. Since reaching its all-time high of 32.5 cents a share in February, the company's value has fallen 50%.

Vonex has a market capitalisation of $30.9 million.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended MNF Group Limited. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Communication Shares

Magnifying glass in front of an open newspaper with paper houses.
Communication Shares

Should I buy News Corporation or REA Group shares?

News Corporation is the majority owner of REA Group.

Read more »

Two male ASX investors and executives wearing dark coloured suits sit at a table holding their mobile phones discussing the highest trading ASX 200 shares today
Communication Shares

Own Telstra shares? Here's what brokers are saying about its new strategy

Let's see what they are saying about this telco giant's bold new plans.

Read more »

man using a mobile phone
Communication Shares

Telstra share price lower on Connected Future 30 strategy

Could fully franked dividends be coming an end?

Read more »

A man casually dressed looks to the side in a pensive, thoughtful manner with one hand under his chin, holding a mobile phone in his hand while thinking about something.
Communication Shares

3 reasons why the Telstra share price could still be a buy

This telco could still be a very attractive opportunity.

Read more »

A cute little kid in a suit pulls a shocked face as he talks on his smartphone.
Share Market News

Telstra share price hits 8-year high amid a lacklustre trading week

The ASX 200 communications services sector was the best performer last week, rising 2.96%.

Read more »

Man smiling at a laptop because of a rising share price.
Dividend Investing

Guess which high-yielding ASX All Ords dividend stock Macquarie expects to surge 34% in a year

Looking for market-beating passive income and share price gains? Check out this ASX All Ords stock!

Read more »

A group of young people smiling and watching TikTok on their mobile phones
Communication Shares

Are Telstra shares heading to $4.90?

One leading broker has given its verdict on the telco giant's shares.

Read more »

Young woman thinking with laptop open.
Communication Shares

How an end of the Trump tariffs could sink Telstra shares

A leading expert foresees trouble for Telstra shares amid Trump’s tariff retreat.

Read more »