The MNF Group Ltd
(ASX: MNF) share price is rising after the business gave a business update to shareholders.
What’s happening to the MNF share price?
MNF wanted to tell investors about its expansion into Singapore, update the market about its earnings guidance and gave a summary about the planned sale of part of MNF’s direct business to Vonex Limited.
Singapore update
MNF said in February that it was conducting final technical trials with several customers, before officially going live in the Singaporean market. Customer technical trials are ongoing and have been successful.
The company is now working towards a go-live date of 1 July 2021, pending final regulatory approval.
FY21 earnings guidance
The company recently re-affirmed earnings guidance of EBITDA (EBITDA explained) for FY21 of between $40 million to $43 million.
Management said that business performance in the last quarter has been solid, and after receiving preliminary financials overnight for the month of May, the company now expects FY21 EBITDA to be within the top half of the guidance range provided. That’s based on performance over a number of months, including the latest monthly result.
Sale to Vonex
MNF has entered into a non-binding conditional term sheet for the sale of part of its direct business to Vonex for $31 million. That’s in line with the company’s goal of simplifying the business, grow recurring revenue and focus on growing the MNF wholesale business, Symbio.
Assuming all conditions are satisfied, MNF expects that an asset sale agreement will be executed in July 2021.
Should the MNF share price be a consideration?
It’s always worth looking at businesses that are generating organic growth. In the FY21 half-year result, recurring revenue rose 15%, EBITDA rose 16% and underlying net profit jumped 30%. Its top 10 clients saw its net revenue retention of 115%, meaning those clients collectively spent more. That’s an attractive factor for organic growth.
Morgan Stanley rates MNF as a buy, with a price target of $6.30. That’s where the broker thinks the share price will be in 12 months. MNF is valued at 20 times the estimated earnings for the 2022 financial year according to Morgan Stanley.
