My Net Fone Limited (ASX: MNF) is a provider of hosted voice and data communication services for residential and business users. The company listed in 2006 and has been profitable every year since listing.
The company has shown strong growth over the past few years. Earnings per share have increased from 2 cents in 2011 to a forecast of 9 cents for FY14, with revenue also climbing from $13.6 million in 2011 to $59 million in 2014 (forecast). Impressively, for the six months ended 31 December 2013, net profit increased by 58% to $2.4 million compared to the prior period, with revenue increasing by 55%. The company expects full-year net profit to be $5.5 million.
My Net Fone's wholly owned subsidiary, Symbio, owns and operates Australia's largest Voice over Internet Protocol (VoIP) network, providing wholesale carrier services to the Australian industry, including number porting, cloud-based hosted private telephone exchange services, call origination, call termination and other infrastructure services. The Symbio network carries over 3 billion minutes of voice per annum and has 100% population coverage in Australia, New Zealand and Singapore.
In simple terms, VoIP refers to voice, data and other communication services that can use the internet for communication as opposed to the traditional, standard landline communication. The use of VoIP can provide substantial cost benefits and flexibility for users. VoIP communication continues to grow at a rapid rate and is replacing traditional phone services. As networks evolve, phone numbers will be taken off traditional networks and hosted on the internet.
My Net Fone continues to gain more of the small to medium business market share. Further, the company's operating costs are largely fixed and consequently margins should continue to expand as the business continues to build scale, which should result in sustained earnings growth over the next few years. Management has also stated that synergies from recent acquisitions are likely to be realised in FY15, which should further drive margin expansion.
My Net Fone's main competitors include ASX-listed TPG Telecom Limited (ASX: TPM) and M2 Telecommunications Limited (ASX: MTU), which are also benefiting from the trend towards internet enabled voice communication.
Foolish takeaway
Despite the company's share price surging 75% over the past 12 months and trading on a price earnings ratio of 26, the current price of $2.13 still offers good value for investors. My Net Fone should continue to grow earnings strongly over the medium term and is set to benefit from the structural trend to internet voice communication.
