Growth Focus: MNF Group Ltd (MNF)

by Patrick Taylor

Date of Data Capture: 10/2/2017


Classification: Telecommunications Services

Current Price: $4.86

Market Capitalisation: $327M

Forecast EBITDA Growth: 31.46%

Gross Yield: 1.75%

Consensus Price Target: $5.75

# Covering Analysts: 4

Discount at Current Price: 18.31%

Price Target Trend: Increasing

Signal Time Frame: Quarterly- Weekly-Daily

Trend Bias: Up-Flat ; Long-Medium-Short

Short-term: Positive Neutral
Medium-term: Positive
Long-term: Positive Neutral

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• MNF is riding a strong long-term uptrend interspersed with occasional (mostly sideways) consolidations – the current compression seems to be ending with signs indicating the price may be ready to proceed again.
• With good fundamental performance and forward forecasting backing them, we are given additional confidence from recent aggressive upgrades to target pricing.
• There is some weak negativity in the monthly timeframe but this is outweighed by positive momentum seen in the daily, weekly and quarterly timeframes.
• Resistance remains overhead at $5.00 with good support around $4.50, $4.25 and $4.00.

Growth Focus: MNF Group Ltd (MNF)

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

While the idea of buying a great stock at rock bottom prices can be an attractive dream, the reality is that growth is often built most firmly on previous growth. Strong historical performance also comes with a price but all good big companies were once small companies whose price kept going up. Such is the case here where we need to crane our necks back to focus on MNF Group Ltd (MNF) as the erstwhile My Net Phone continue to increase their net sales, earnings, profits and potential.

This voice over internet protocol specialist and integrated voice services company began business in 2004, listed on to the ASX in 2006 and is headquartered in Sydney. MNF is fast growing, cash accretive and actively acquisitive, having absorbed wholesale voice carrier TNZI in April 2015 and also CCI at the start of this month. While these deals pave the way to future growth the full benefits and synergies tend to take a little while to kick in. This seems to be under full swing with TNZI, though the CCI deal, while having some immediate benefits, will take some time to mature.

Luckily MNF is able to stand on its own two feet when it comes to organic growth with deals struck with Telstra in October of 2016 and the Victorian government earlier this month also. This adds to a now familiar tune of strong fundamental growth that is set to keep on going, with EBITDA up 46 last year and significant growth forecasts ahead. While they do pay a small dividend it is really their growth prospects that bring us to the yard and with 4 analysts giving an aggregate target price of $5.75, some 18.3% higher than here, we are happy to take the line.

If we had one hang up it would be hat they haven’t really had a real drop in the market since the GFC and really the best entries to be found over the last few years have been by elbowing into positions during occasional, mostly sideways, consolidations. They seem to be coming out of a medium-term pullback right now as they crouch beneath their all-time highs and structural resistance at $5.00. We see good short-term momentum looking to connect to longer-term strength here as we dial in clear positive signalling and confirming price action.

We like MNF Group because of its exciting technology combined with strong (founder-led) management. When you add their robust fundamental performance, formidable forecasting and well-correlated technical signals, it becomes difficult to ignore the call to pick up MNF.

** Edit: 14-2-2017 H1 FY17 Results were released before the publication of this article **
MNF has reported strong EBITDA growth of 22% and NPAT growth of 21% - this is slightly under expectations but still very strong. Nevertheless they are currently under pricing pressure so hold off short-term buying until this dip completes and use this as an opportunistic entry. We are happy with our analysis and accordingly this article has been published in original format.


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.

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