MNF Group Limited (ASX: MNF) nosedived on FY19 and FY20 guidance


Communication specialist MNF Group Limited plunged 7.737% in early trade after the group provided FY19 and FY20 guidance following the acquisition of Inabox Group’s (ASX: IAB) wholesale and software services business.

Recently the group announced the acquisition of wholesale and enablement business of Inabox Group for $30.5 million upfront in cash and $3 million earn-outs on business performance. The takeover has been funded through the stretching of MNF’s existing acquisition facility and free cash flows of the company.

The Board expects to generate additional $55.0 million revenue and earnings before interest, tax, depreciation and amortization (EBITDA) of approximately $4.2 million following the takeover of complementary business Software as a service (SaaS).

But, what made the MNF Group bleed?

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It seems to be lower than expected guidance announced by the group. Looking into fiscal year 2019 and 2020, the group today announced the EBITDA of $29.1 million in FY19, and the expected range of $33.0 million to $36.0 million EBITDA in FY20. This is in comparison to actual EBITDA earned in fiscal 2018, which was $24.4 million.

At the same time, Net Profit After Tax (NPAT) is anticipated to move slightly up from actual $11.9 million in FY18 to $12.8 million in FY19. This translates the Earnings Per Share (EPS) of 17.5 cents in FY19, higher than 16.3 cents per share earned in previous year 2018. Whereas, for FY20 NPAT is forecasted to lie somewhere between $15.0 million and $16.5 million and EPS between 20.4 cents and 22.4 cents per share.

The group informed that FY19 guidance has been drawn out after including the 7 months contribution from Wholesale and Enablement assets of IAB. But the outlook has definitely hurt the market sentiments as MNF’s stock is eyeing a downtrend since morning.

It seems investors have been expecting better guidance following the company’s market share improvement in Australian wholesale telecommunication market led by IAB’s wholesale and enablement assets (TIAB) acquisition. The further increase in earnings was expected ahead the launch of telco brand PennyTel by MNF group. The brand is targeted towards the enhanced regional coverage in Australia.

Moreover, in the previous announcement MNF told that acquisition of TIAB is expected to be completed by 30 November 2018. Also, it has been told that the group targets working capital of $2.0 million on completion which is anticipated to include $1.5 million cash.

Listed in 2006, MNF Group describes itself as global provider of integrated network and telecommunication software. It specializes in voice over internet protocol (VoIP) space. The group has presence across Australia, New York, London, Singapore, Los Angeles, Hing Kong, Frankfurt and Auckland. The retail brands of the group include CallStream, MyNetFone, PennyTel, Connexus, and The Buz while its conferencing brands are Eureka, Ozlink, Express Virtual Meetings and wholesale brands Symbio Networks, TNZI, and iBoss.

MNF Group’s shares have been witnessing the crash in intra-trading today. The stock price has gone as much as 7.737% down to stand at $4.770 on 10 October 2018 (12:30 PM AEST).   The stock has seen a performance change of -5.66% over the past on year and in the last three months the stock price has fallen by 2.45%. Currently, MNF is trading at PE of 31.820 x with market capitalization of $379.02 million.

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