January share purchase no.1 : MANX

The Alternative Investment Market is home to many weird and wonderful businesses, some of which are household names, and based on market capitalisation would comfortably sit in the FTSE 250, and even make a run at the FTSE 100 – just check out Burford Capital (BUR), Fevertree (FEVR) or ASOS (ASC). It has a lighter regulatory framework to the main market and therefore has greater regulatory wriggle room which could be exploited by badly run businesses, a quick Google search will reveal plenty of examples.

Manx Telecom (MANX) is a telecoms company operating on the Isle of Man (the clue is in the name 😊). They provide fixed line, broadband and mobile telecoms, run a couple of datacentres and are launching a new product to help mobile users with hearing difficulties. They were admitted to the AIM in February 2014.

So the first purchase of the year is a bit leftfield, falling into the speculative part of the portfolio, and therefore was a smaller purchase…

As a speculative investment, I’m not expecting them to meet my standard investment criteria. However, they are appealing for a couple of key points. As the leading comms provider on the Isle of Man there is clearly a “moat” around their business and their core revenues from the residents of the Isle are “sticky” – at least there is going to be a degree of cost involved in switching to an alternative supplier. And their new products, should they prove successful should act as a decent tailwind for the stock. They are a capital intensive business, with more debt than I would like, which is not ideal, but it is defensive in nature.

The share price has been in decline over the past few months and at the time of purchase it looked as if it was finding a bottom (hopefully I’ll not be posting something here in a few months about catching falling knives). Partly as a result of the share price fall, at the time of purchase the dividend yield was around 7%. Anything above 5% gets a big thumbs up, but given the new products, and potential investment required, I wouldn’t be surprised to see the dividend reduced. For 2017 the full dividend per share was 11.4p, adjusted earnings per share was 13.28p and cash flow per share around 10p per share (depending how you calculate it).