After a difficult few years, MTN has come roaring back, more than doubling its market capitalisation in the last year. While its share performance has brought the company back in line with historical valuations, the path ahead to a genuine rerating of the group remains challenging and will require faultless execution from management.
Investing is all about entry and exit points. Though shareholders holding MTN over five years would have reaped gains just shy of 20% in that time, anyone buying into a devalued MTN 12 months ago would have enjoyed a return of 150%. That seems like a startling rerating of the African telecommunications giant, and it reflects several tailwinds boosting its core business, in tandem with shrewd leadership.
It may seem surprising to speak of the oil price and television sets (see sidebar) in weighing up MTN’s performance, but it is critical to the company’s fortunes. Ninety One fund manager Samantha Hartard says MTN’s performance is inescapably linked to Africa’s commodity market performance – especially the price of oil.
“MTN’s resurgence is threefold. Firstly, the macro-economic environment has seen the African economy, and Nigerian economy in particular, move off the harsh lows of last year – the low base effect. We have seen an oil price rally and the rest of the continent seems to be emerging from the Covid-19 crisis. MTN’s delivery on operational performance has also exceeded expectations, with expanding earnings before interest, tax, depreciation and amortisation (ebitda) margins growing faster than revenue. This has allowed management to deleverage the group’s balance sheet,” says Hartard.
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