Even though Manx Telecom(LSE: MANX) has a market capitalisation of over £200m, the company flies under the radar of most investors. Operating in and around the Isle of Man, it's one of a number of Manx branded businesses on the island. The company, as its name suggests, provides telecommunications services to the island's residents as well off-island services for residents and has a virtual monopoly over the island's telecom network.
Today the company reported that trading in 2016 met its expectations amid solid performances by its core businesses fixed line, broadband, data and mobile. Also, the company's rollout of high-speed broadband continues to prove attractive to customers with 93% of premises on the Isle of Man now served.
A successful promotional campaign in the lead-up to Christmas helped the group's 4G mobile network continue to grow during the year. The one division that failed to meet expectations was data centre revenue, which came in lower for the year because of a decline in low-margin kit sales and weaker data centre usage due to customer consolidation. Still, data centre revenue declines have been offset by better revenue from the firm's Global Solutions arm.
It's Manx's global ambitions that give me confidence in its outlook. While it has a steady base of customers on the Isle of Man, management is looking outside the region to improve its reach and revenues. Indeed, at the end of last year, it won a contract from China Unicom to provide roaming connectivity for Chinese visitors to the UK. The contract will enable Manx, through its relationship with Telefonica, to provide connectivity to China Unicom's CUniq UK mobile and roaming product. CUniq, a mobile virtual operator, was launched in the UK on 2 December to provide the over 1m travellers from China roaming access.
Unfortunately, City analysts expect Manx's earnings per share to fall by 9% this year, but growth is expected for 2017 and 2018. For the full-year 2017 analysts have pencilled-in earnings per share growth of 4%, and growth of 18% is expected for 2018. Shares in the company trade at a forward P/E of 15 and support a dividend yield of 5.5%. The yield is expected to hit 5.7% next year.
Growth at a reasonable price
When it comes to looking for growth at a reasonable price, Manx may be a better buy than its larger peer Vodafone(LSE: VOD). At the time of writing, shares in Vodafone trade at a forward P/E of 36.5 and yield 5.3%. City analysts expect the company to hike its dividend payout by around 1p this year increasing the yield to 5.9%.
On yield alone, Vodafone may be the better bet, and if you're worried about investing in small-caps, then Manx may not be your cup of tea. However, Manx is an interesting opportunity and compared to Vodafone, the company's shares look cheap. Further, if management can drive growth through international expansion over the next few years, the business may be a steal at current prices.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.