CardinalStone Sees Airtel Africa Rising to N5.9trn, Initiates Coverage

CardinalStone Sees Airtel Africa Rising to N5.9trn, Initiates Coverage

Nigeria’s leading investment firm CardinalStone Securities Limited has initiated Airtel Africa (Ticker: AIRTELAFRI) coverage and its analysts are expecting the telecom company market valuation to rise to N5.9 trillion. The company is currently valued at about N4.698 trillion in the Nigerian Exchange at N1,250 per share.

After the telecom company repurchased shares from its non-controlling or minority shareholders in Nigeria, its share price skyrocketed, crossing N2000 before the falling angel reversed the uptick due to sporadic selloffs in the local bourse. #Nigerian Market Prices Airtel Africa for About N8trn

Also, some analysts noted that Airtel Africa’s earnings, and profit have been weakened, though capital spending remains uptight as management continues to position the brand for improved market share.

Some equity analysts also think that the telecom operator valuation is quite steep when compared with MTN Nigeria, the industry leader, with about 39% of the market share as of June, according to data from the Nigeria Communications Commission.

“We initiate coverage on Airtel Africa Plc with a 12-month target price and projected market capitalization of N1,559.4 and N5.9 trillion, respectively.

“Our target price implies a total return of 27.8% – comprising expected capital appreciation of 24.8% and a dividend yield of 3.1% and a BUY recommendation on the stock”, CardinalStone Securities said in its report.

The investment firm said its outlook on the stock is premised on projected improvements in return metrics, which analysts noted is consistent with the company fundamentals.

The report noted that Airtel Africa has three core segments operating in 14 countries with vast macroeconomic potentials, favourable demographic constitution, and rapidly expanding addressable markets;

The company’s targeted markets have mostly good regulatory environments, where authorities appear determined to drive greater financial inclusion through partnerships with fintech and mobile money operators, an area in which AIRTELAFRI has demonstrable experience.

“That the company is yet to scratch the surface regarding coverage of the about 40.0 million unbanked Nigerians speaks to the growth potential of its mobile money business”, analysts said in the report.

They also noted that data is becoming a way of life in Africa, with the rapid acceptance of smart home initiatives and online gaming combined with the COVID-inspired rise in remote engagements across firms, schools, and churches as major fulcrums for data earnings.

CardinalStone affirmed its view on the telecom, saying that AIRTELAFRI has strong positioning across target markets and robust support from an experienced parent company.

CardinalStone review indicates that analysts are positive about the future earnings growth of the telecom firm. The report noted that the mobile money growth outlook remains biased to the upside, with ample room for more financial inclusion given the large unbanked population in its sphere of operations.

“Specifically, we think the Nigerian market, a grey area, offers more opportunity, with mobile money just becoming popularized. AIRTELAFRI is also looking to spin off the mobile money business and believes blockchains and cryptos can be future opportunities, especially when African governments become more amenable to the idea”.  

Analysts explained further that the payment service bank (PSB) license obtained in Nigeria should open new income frontiers, such as fees and deposit commissions. With this license, AIRTELAFRI could also earn income from the issuance and use of Automated Teller Machine (ATM) cards, with the low ATM per capita of 16.2 per 100,000 in Nigeria highlighting the immense potential, CardinalStone wrote.  

The investment firm said more importantly, with PSB, AIRTELAFRI would get to keep all the USSD fees from related transactions, which were hitherto shared with the banks.“We also like the opportunity to invest in FGN and CBN securities that come with the license, as it will enable the company to benefit from yield trends and diversify earnings”.

#CardinalStone Sees Airtel Africa Rising to N5.9trn, Initiates Coverage

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