MIDAS SHARE TIPS UPDATE: Island's roaring economic growth helps to put Manx Telecom shares in fast lane with 27% gain
The Isle of Man must be doing something right. With a population of 85,000, this self-governing island in the Irish Sea has enjoyed 32 years of uninterrupted economic growth.
Other Crown Dependencies, such as Jersey and Guernsey, focus heavily on the financial services sector. The Isle of Man has deliberately broadened its range to include industries such as film, shipping, aviation, manufacturing and online gaming, as well as the annual TT motorcycle race.
This breadth and the growth it delivers have helped the island’s main phone provider, Manx Telecom, to do rather well since floating on AIM in February 2014 at 142p. By March, when Midas recommended the shares, they had already risen to 161p and today the price is 205p, with brokers expecting more to come.
Boost: The annual TT bike race helps the island’s economy
Chief executive Mike Dye retired in the summer after 30 years with the company. He has been replaced by Gary Lamb, who was finance director for four years before moving up in July.
Lamb oversaw the flotation and intends to retain the strategy outlined back then: steady growth from the core telecoms and broadband business and more exciting prospects from two other areas – data centres and so-called ‘global solutions’, essentially special SIM cards sold on the UK mainland and round the world.
The data centres are growing fast, as companies from banks to gaming groups move parts of their operations to the Isle of Man and store sensitive data in Manx Telecom’s sophisticated centres.
The SIM card division has plenty of potential, too. Manx has arrangements with 38 phone firms, so its special SIM cards work across networks, meaning there is an almost guaranteed signal, wherever you are. This makes them particularly suitable for the emergency services, vets in remote spots, social workers in dangerous areas and security firms, for example.
Manx also sells SIM cards offering cheap calls abroad and its cards are installed in a range of devices such as smart meters and lorries delivering frozen goods.
In September, Lamb unveiled his first set of results as boss. The global solutions business was hit by a one-off technical issue, but the results still showed rising sales and profits and Lamb confirmed Manx Telecom’s commitment to a progressive dividend. Analysts expect decent growth over the coming years, with a 5 per cent rise in the annual payout to 10.4p in 2015 and almost 5 per cent again, to 10.9p, in 2016.
Midas verdict: Even after rising 27 per cent since last March, Manx still offers investors a 5 per cent yield. The global solutions figures were disappointing at the half year, but the future appears much brighter and the rest of the business looks extremely solid. Those who bought last year should hold. Income investors may also find the stock attractive, especially in the long term.
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