• Friday, March 29, 2024
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BusinessDay

MTN Nigeria’s stock is bright spot amid the gloom

MTN to launch mobile apps for SMES business optimisation

MTN Nigeria Communications Plc is a good defensive stock amid the gloom caused by the coronavirus pandemics that is ravaging the economy and causing severe gyrations in the equities market.

A defensive stock is hot cake because its revenue and profits are less sensitive to the well-being of the overall economy.

While the coronavirus pandemic has damped the outlook of sectors from banking to consumer goods to hospitality, analysts expect better numbers from MTN Nigeria in the months ahead as data usage will surge among populace because Nigerians were forced to stay at home so as to prevent the spread of the virus.

MTN Nigeria has been recording double digit growth at the top ( sales) and bottom line ( Profit) since it listed its shares on the bourse two years ago, magnifying shareholders earnings by way of share appreciation and bumper dividend.

The telecommunications giant delivered another breath taking performance in the first quarter of year, as it continues to deepen data penetration with the further roll out of 4G sites.

For the first three months through March 2019, revenue increased by 16.70 percent to N329.17 billion from N282.11 billion the previous year.

Read also: Nestle, Dangote Cement, MTNN, others push stock market to new high

The growth in revenue was drive by 58.90 percent and 34.04 percent increase in Data and value added service to N74 billion and N11.38 billion in March 2020 from N46.56 billion and N8.49 billion the previous year .

MTN Nigeria continues to increase its market share as it added 4.20 subscribers to its network, representing a 6.50 percent increase from last year.

The telecoms giant has controlled costs while its products are adding impetus to sales as operating profit otherwise known as earnings before interest and tax (EBIT) increased by 18.60 percent to N111.29 billion in the period under review from N93.86 billion as at March 2019.

Profit before tax followed the same growth trajectory as it 8.91 percent to N76.30 billion in the period under review from N70.09 billion the previous year.

MTN Nigeria can pay the interest on outstanding debt as interest coverage ratio stood at 2.73 times earnings. A figure above 1.50 means a firm is not beset by rising or mounting obligation, and a situation paves the way for robust risk.

The company generates more money from its operations per Naira as operating cash flow margins otherwise known as cash margin increased to 46.70 percent in March 2020 from 43.83 percent the previous year.

The company has the ammunitions to weather the headwinds and pay future dividend and meet debt obligations as free cashflow stood at N146.59 billion in the period under review as against N91.98 billion as at March 2019

Investors pay attention to the free cash-flow because it shows them the extent to which a firm has the financial impetus to settle outstanding debt, fund future expansion plans and pay future dividend.

Also, cash generated from operating activities increased by 25.43 percent to N153.74 billion as at March 2018 from N122.67 billion the previous year; net cash generated from operations stood at N128.62 billion as at March 2020 from a negative position of N25.05 billion the previous year.

MTN Nigeria has utilized the resources of shareholders in generating higher profit as annualized return on average equity (ROAE) increased to 120.20 percent in the period under review as against 106.50 percent as at March 2019.

The company’s share price closed at N120 as at 2:00 pm Lagos, valuing it at N2.44 trillion. It has shareholders fund of N195.70 billion as at Ma4ch 2020, while retained profit has hit N117.68 billion in the same period.

Telecommunications companies in Africa’s largest economy are taking advantage of the country’s growing young population to broadband subscriptions.

Recent data on key industry fundamentals published by the Nigerian Communications Commission (NCC) showed that the total number of broadband subscriptions grew 1.8 percent m/m percent and 19.0 percent year on year (y/y) to 73.5 million.

Furthermore, Broadband penetration expanded to 38.49 percent in January 2020 from 37.80 percent in December 2019 and 32.34 percent in Jan 2019.

In a related development, the Nigerian bureau of statistics published data on active voice subscriptions within the country for fourth quarter (Q4) 2019 which showed a sturdy 6.9 percent (y/y) increase to 184.7 million subscriptions from 172.8 million subscriptions in Q4 2018.

“Accordingly, with the already strong mobile phone penetration and growing broadband take-up among households, we expect the industry to report stronger growth in 2020 as revenue from data usage and voice calls are expected to spike,” said Analysts at United Capital Research Limited.

“Notably, this presents retail investors the opportunity to tap into these gains by investing in some of the industry players that are listed on the Nigerian Stock Exchange,” said the analysts.