ASX telecommunications company MNF Group Ltd (ASX: MNF) develops the software that facilitates many of the services we’re all using a lot more of these days. The company specialises in Voice over Internet Protocol (VoIP) technology, which is a way to convert analogue audio into digital data that can be transmitted over the internet. This tech is used to support services like teleconferencing, online business meetings and digital data transfers.
With large swathes of the global workforce now advised to work from home as much as possible, demand for these services is rapidly increasing. And while the future is incredibly uncertain right now, there is the possibility that the coronavirus pandemic could permanently change the way many industries think about how they deploy their workforce.
Despite falling to a new 52-week low of $2.77 back in March, the MNF share price has now recovered just about all of its coronavirus losses. As at the time of writing, MNF shares are valued at $5.14, within touching distance of the 52-week high of $5.48 it reached in September 2019.
The swift turnaround came as a result of the company reaffirming its FY20 earnings guidance, even in the midst of the panic selling that swept through global markets in March. It forecast FY20 EBITDA in the range of $36 million to $39 million, which would represent an uplift of at least 32% over FY19.
In a further trading update released to the market towards the end of April, MNF stated that it was experiencing higher demand across most of its business segments as many companies and schools continued stay-at-home arrangements.
Why I would invest
There are a few niche companies that have experienced rapid increases in demand during the coronavirus pandemic. Meal kit delivery service Marley Spoon AG (ASX: MMM) has seen its share price skyrocket, as have online retailer Kogan.com Ltd (ASX:KGN) and data centre operator NextDC Ltd (ASX: NXT).
But the important thing to consider is whether the current rise in demand that these companies are all experiencing will be permanent or not. Companies like Marley Spoon have seen increased market penetration during this time as people are unable to eat out at restaurants and limit trips to the supermarket. Similarly, Kogan has seen a rapid surge in people ordering items online due to the temporary closure of many retailers.
But will these patterns of consumer behaviour outlast the pandemic? For example, as restaurants open up again and people are no longer confined as stringently to their homes, demand for Marley Spoon may drop off.
However, I believe the coronavirus crisis could have lasting impacts on the way many people choose to work. The path back to full capacity in many office buildings will be a long, slow journey, and I think that many people may choose to continue to work remotely. Similarly, large corporations may realise they can save on property costs by continuing to have large percentages of their workforce telecommuting.
I believe companies like MNF Group and NextDC may be the ones most likely to see a permanent uplift in demand in a post-coronavirus economy.
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Rhys Brock owns shares of Kogan.com ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of MNF Group Limited. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia has recommended MNF Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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