Lens on Two ASX Small-cap Players with Solid FY20 Results - Hub24 and MNF

Summary

• Despite the prevailing uncertainty in the market, two small-cap players, Hub24 and MNF, managed to deliver impressive FY2020 performance.
• The two stocks have done well on the ASX, surpassing their respective industry performance over the last 12 months.
• Financial services player HUB24 reported a 49% growth in underlying NPAT at A$10.1 million. It declared FY2020 dividend of 7 cents per share.
• MNF reported a 7% increase in revenue to A$230.9 million and NPAT by 20% to A$11.95 million.

During August, several ASX listed companies released their financial results with most of the financial figures reflecting the severe impact of the pandemic-driven crisis. However, there are quite a few players that weathered the coronavirus storm and reported impressive top-line and bottom-line numbers.

In this article, we have considered two small-cap companies Hub24 and MNF from the financial sector and communication sector, respectively, that delivered solid FY2020 results. Despite the challenging market situation, both the companies managed to provide good performance during the period. While HUB24 reported a 49% increase in underlying NPAT, MNF Group’s recurring revenue was up 27%. However, despite the promising results, the two players witnessed a significant drop in their respective share price on the day of the results announcement.

The S&P/ASX 200 Financials and the S&P/ASX 200 Communication Services indices have provided a return of -21.05% and -8.98% respectively in the last one year. Both MNF (communication sector) and HUB24 (financial sector) have considerably outperformed the sector indices with returns of ~33% and ~45% in the previous 12 months.

On that note, let us take a look at FY2020 result posted by these companies.

HUB24 Limited (ASX:HUB)

HUB24 Limited is a provider of investment and superannuation platform services, released its FY2020 results for the 12 months ended 30 June 2020. The Company reported strong results with 49% growth in underlying NPAT to A$10.1 million, Underlying EBITDA by 60% to A$24.7 million and Underlying Platform EBITDA by 59% to A$28.7 million.

Despite the strong result posted by the Company, the shares, on 25 August 2020, settled in the red zone at A$15.33, down 1.541%. The shares closed near its 52-week high price.

FY2020 Highlights:

• Record platform net inflows of A$4.95 billion up 27% as compared to the previous corresponding period (pcp).
• Funds Under Administration (FUA) increased by 34% on pcp to A$17.4 billion. As at 21 August 2020, the FUA stood at A$18.5 billion.
• Platform Revenue grew by 37% to A$74.3 million on FY2019.
• Underlying Group EBITDA went up by 60% to A$24.7 million on pcp.
• Declared fully franked dividend of 3.5 cps for 2H FY2020. Thus, taking the full-year dividend of 7 cps, up 52% on FY2019.

For HUB24, the year 2020 was a successful one despite the COVID-19 pandemic impact on customers, staff, shareholders, and the community. The financial position remained robust, with operating profitably and strong operating cash flows. The cash reserves were considerably above regulatory capital requirements. During April 2020, the net cash inflow was softer due to COVID-19. However, towards the end of the year, the situation improved considerably with the Company attaining net inflows of A$4.95 billion for FY2020.

Given the ongoing opportunities for growth, HUB24 remains focused on investing for the future and delivering on strategic objectives. The Company is now targeting an FUA in between A$28 billion to A$32 billion by 30 June 2022.

Business Highlights:

CFO Appointment:

HUB24 also announced the appointment of Ms Kitrina Shanahan as Chief Financial Officer and Joint Company Secretary. Ms Shanahan would commence the role on 7 September 2020. Ms Shanahan holds over 20 years of experience in finance, governance, and risk most lately as Chief Financial Officer Insurance at Westpac.

Outlook:

• Position HUB24 for ongoing success.
• Pursue growth.
• Continuing Strong Financial Results.

As at 1:51 PM AEST on 27 August 2020, HUB share price stood at A$15.910, down 0.749%.

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MNF Group Limited (ASX:MNF)

MNF Group Limited, a leading provider of voice communications software, announced its FY2020 results for the financial year ended 30 June 2020. During FY2020, the Company’s revenue increased by 7% to A$230.9 million and recurring revenue by 27% to A$101.5 million exhibiting the success of MNF’s strategy to boost recurring revenue. The NPAT improved by 20% to A$11.95 million as compared to FY2019. Underlying NPAT-A rose 18% to A$16.6 million and EPS by 10% to 14.88 cents per share.

Despite, the impressive FY2020 results posted by the Company, MNF shares could not perform well on ASX where a drop of 12.742% was seen in the share price, and the shares closed at A$5.41 on the day of the announcement. The shares were able to attain the maximum price of A$6.130 on the day.

MNF delivered a robust FY2020 performance, maintaining the momentum generated in 1HFY2020 to deliver results at the top end of guidance. The Company also noted an increase in the demand for its products which pushed its revenue.

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Post 1H FY2020, some of MNF’s products did well because of the structural and behavioural changes to voice and collaborative technology as a result of the pandemic. As people moved from workplaces and schools to homes and looking for new ways to stay connected and adapt to the new working style, the Company witnessed an increase in traffic volumes across all customer segments during March 2020 and April 2020. Traffic patterns have settled as of now since March 2020. The new trends which have emerged are expected to continue.

MNF Group also saw customers in the UCaaS, CPaaS and collaboration use-case areas felt fast growth in demand, equal to over three years of normal growth. On the contrary, the demand for other use-cases such as mobile roaming as well as small business phone systems has deteriorated due to travel restrictions and the prevailing economic uncertainty.

The balance sheet of the Company remained strong, with a closing balance of A$46.2 million.

Outlook:

As at 1:51 PM AEST on 27 August 2020, MNF share price stood at A$5.355, up 4.59%.