MTN Nigeria Exits Investors Relegation, Gains 21% in Fresh Rally
MTN Nigeria Plc gained 21% in the equities market in a two-day rally driven by investors’ improved sentiment on telco shares in the local bourse. The stock, which had earlier entered relegation, began to attract investors’ attentions after the management localised its loan via deal renegotiation with service providers.
Then, a successful clamour for a tariff hike has raised investors’ hope that the telecom giant would bounce back from delivering negative arnings. According to data from the Nigerian Exchange, the telecommunications company share price inched higher by 21% last week to N242 on Friday.
The price uptick lifted its market value above N5 trillion, a valuation level seen a long time ago. MTN Nigeria had led the local bourse as most valuable until its earnings disaster triggered massive selloffs. It has gained 42% from N170 per share in November 2024.
MTNN’s numbers showed a return to profitability in Q3-24 standalone, highlighting the impact of the successful renegotiation of tower leases with IHS, which resulted in cost savings with a modest impact on EBITDA and earnings, Cordros Securities Limited said in a note.
Analysts said the company’s earnings before interest tax depreciation and amortisation (EBITDA) margin, though still weaker year on year, improved from the multiperiod low of 31.9% in Q2-24 to 37.6% in Q3-24 standalone, with EPS also turning positive.
Notwithstanding, the 9M-24 earnings scorecard still points to another significant loss-making year, despite the aforementioned positives, highlighting the outsized impact of the currency devaluation and unwinding of letter of credit obligations to about USD57.00 million from USD100.00 million in the first half and full-year amount of USD416.60 million in 2023, Cordros stated.
The investment firm raised the target price on MTN Nigeria to N220.39 from N218.80. Analysts also raise revenue growth expectations and adjust EBITDA to more adequately reflect the impact of the tower lease renegotiation.
“We now project a +29.2% year-on-year growth in revenue for MTNN in 2024 in line with management guidance on higher average revenue per user ARPU amid a marginal 1.4% increase in mobile subscribers to 80.85 million subscribers.”. Cordros Securities Limited also expects the bulk of the growth to come from data revenue, driven by sustained usage amid continuous investments in enhancing data network capabilities.
“Even as we now expect a slower pickup on subscriber count, highlighting compliance with the NCC’s regulations on SIM registration, we still expect a steady double-digit increase in voice revenue.
“We forecast an EBITDA margin print of 37% as we account for the successful renegotiation of IHS tower lease agreements, which should drive further margin recovery in Q4-24, just as seen in Q3-24”, Cordros said in an equity review.
The firm said MTN Nigeria management now expects a 2024 EBITDA margin to settle between 35.0% and 37.0%. With a better operating margin and net FX loss estimate of N904.12 billion, analysts said they now project a loss per share of N18.31. ECOWAS Issues Deadline to Bukina Faso, Mali, Niger
