MIDAS SHARE TIPS UPDATE: Sit tight after Manx Telecom offers a racy maiden dividend
High speed: Mark Cavendish helped with Manx's 4G launch
Manx Telecom is a stock made for income investors.
The leading telecoms firm on the Isle of Man, it is financially robust, generates plenty of cash and is determined to pay generous dividends.
The group listed on AIM in February and last month declared a maiden interim dividend of 3.3p, saying it expected to pay a final one of 6.6p after its annual results early next year.
Midas tipped the shares in March at 162p, since when they have risen to 1731⁄2p.
At this level, they offer an attractive yield of more than 5.5 per cent and chief executive Mike Dee is wedded to a progressive dividend policy.
Manx is the incumbent telecoms provider on the Isle of Man, providing most of the island’s fixed-line phones and broadband. That is low-growth business but Manx – which sponsors cycling club Team Manx Telecom, including champion racer Mark Cavendish – is also one of two mobile providers. It stole a march on its competitor over the summer by being the first to roll out 4G services, now covering 95 per cent of the island.
The firm has an off-island business too, renting space from UK mobile phone operators so it can offer cheap SIM cards in Britain.
Its Chameleon service is also offered to companies that need to monitor the whereabouts of lorry loads of perishable goods or individuals working alone in potentially dangerous places. In the six months to June, this was the fastest growing division, increasing sales by almost 30 per cent to £8.3 million, out of total group sales of £39.5 million.
The fixed-line division increased sales by 2 per cent, while mobile fell slightly as the company was forced to charge customers less for ending agreements.
This is unlikely to weigh on results over the long term.
Manx also operates data centres, enabling local companies to store electronic data. Primarily used by gaming and financial customers, these centres have seen growing demand. A new site has been opened, with fresh space coming on stream next year and in 2017.
Data centre revenues were up just 0.9 per cent in the first half as tenants waited for the new site to be up and running. In future, however, the division should deliver good growth.
Analysts forecast an 81 per cent increase in 2014 profits to £13.2 million, largely because Manx’s debt has fallen sharply after listing on AIM. In 2015, profits are forecast to rise 15 per cent to £14.7 million.
A 9.9p full-year dividend is expected for 2014, rising to 10.4p the year after.
Midas verdict: Manx is a solid stock and the interims have shown it can deliver. Investors who bought in March should hold. Others in search of income should consider buying in.
Traded on: AIM Ticker: MANX Contact: manxtelecom.com or 01624 624624
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