There’s value for investors in MTN Nigeria public offer

Nigeria’s largest telecommunications provider, MTN Nigeria Communications (MTNN) Plc started a public offer of its shares on Wednesday, December 1 which allows retail investors to purchase up to 575 million shares at N169 per share—lower than its share price on the secondary market.

The public offer

The ongoing public offer which closes on December 14 is in line with MTN Group’s commitment to reduce its shareholding in MTN Nigeria from 79percent to 65percent over time. For investors seeking to invest in stocks with higher returns – in form of capital appreciation and dividend yield, MTNN is one to own.

The minimum number of shares that can be bought in the retail offer is 20 units. Also, to encourage people to buy more, the MTN Nigeria offer includes one (1) bonus share for every twenty (20) purchased, subject to a maximum of 250 free shares per investor—an incentive open to retail investors who hold shares for at least 12 months after allotment.

About MTN Nigeria

MTN Nigeria is part of the MTN Group. It’s a leading emerging markets operator with 272 million subscribers, 119million active data users and 51million active mobile money customers. It is the leading operator with over 50percent market share. MTNN is the largest listed company by revenue and the second largest listed company in Nigeria by market capitalisation offers returns to shareholders.

MTN Group currently holds circa 79percent stake in MTNN; plans to progressively reduce this to circa 65percent through a series of offers for sale. The 575million shares are being offered for sale in the Series 1 Offer. The company’s Board of Directors provides a strong mix of diversity, experience, governance, and technical expertise.

The Board promotes MTN Nigeria’s long term growth and development; overseas its world class approach to corporate governance, supports strategic initiatives and provides guidance and advice to management.

Rationale for the Offer

While the public offer is aimed at providing more Nigerians with the opportunity to own an equity stake in MTN Nigeria, it introduces a wider base of Nigerian shareholders into the ownership of MTN Nigeria; increases free float of MTN Nigeria on the Nigerian Exchange Limited (NGX); and enhances the liquidity of MTNN shares for existing and future shareholders.

Financial framework underpins Ambition 2025 Strategy

MTN’s financial framework is underpinning its Ambition 2025 Strategy. In third-quarter (Q3) 2021, MTNN recorded stellar financial performance, delivering the largest revenues of any publicly listed Nigerian corporate.

Service revenue grew by 23.7percent to N1.204trillion; Data Revenue was up by 51.5percent to N366billion; Voice Revenue went up by 10.6percent to N722billion; EBITDA Margin of N635billion represents an increase by 52.6percent; Profit After Tax (PAT) grew by 52.7percent to N220billion while interim Dividend Per Share was up by 30percen to N4.55.

Read also: MTN, Airtel can’t replicate Safaricom’s success in Nigeria with PSBs – Report

Analysts say the offer represents excellent value for investors

Coronation Securities analysts in their recent note to investors noted that MTNN has a dividend payout policy of 80percent of earnings, adding that the current dividend yield is around 5.5percent. According to Coronation Securities analysts, “The offer represents excellent value for investors”.

Coronation Securities analysts further noted that, “MTNN investors have enjoyed impressive returns both via dividends and share price returns. Since listing on the NGX in 2019, the stock share price has risen by 111.11percent. Over the last ten years, the company has paid dividends consistently (barring the regulatory fine years of 2016 -2017).

Also, United Capital Research analysts in a December 1 note to equity investors noted that “MTNN remains an undervalued stock when compared to peers across Africa.”

“Despite the thin discount between the offer price of N169/share and current market price of N171/share, taking up the offer for sale helps an investor acquire shares without significant market impact as well as avoiding transaction costs.”

“To put in perspective, buying via the floor of the exchange will result in a WACC of circa N173.45/s (assuming a 1percent brokerage commission), compared to the flat offer price of N169/s,” United Capital analysts added.

“Across our peer coverage, MTNN has a best-in-class return-on-equity (ROE) of 179.2percent, compared to African peer average of 29.9percent. In addition, it has the second fastest earnings growth on a Trailing Twelve Months (TTM) at 48percent, significantly ahead of peer average of 8.2percent.

“Despite this, MTNN trades at a 27.4percent and 19.6percent discount to peer average PE ratio (MTNN: 12.3x versus Peer Average: 15.7x) and Enterprise Value / Earnings before interest, tax, depreciation and amortization (EV/EBITDA) ratio (MTNN: 5.5x verus Peer Average: 6.6x). This undervaluation is evident in our fair value forecast of N232.47/share, which implies an upside of 37.6percent over the offer price of N169/s”, the analysts further said.

Stakeholders speak at investor forum in Lagos

Recently in Lagos, MTNN held Investor Forum which provided insights into MTN Nigeria’s investment case, the public offer and business outlook.

Karl Toriola, CEO, MTNN who said “This forum gives investors the opportunity to make informed decision on the need to invest in the offer”.

He noted that MTNN has dividend payment policy of a minimum of 80percent of net distributable income. Over N2.3trillion paid out since inception as dividend. MTNN has stellar financial performance delivering the largest revenue of any publicly listed Nigerian corporate,” Toriola added.

Olatunde Amolegbe, President, Chartered Institute of Stockbrokers (CIS) said, “MTNN today is helping us to move in the direction this market has sought for a while.”

“As operators, this is a vision that this market has been looking for in the past 30 years – having a market that is not driven by volatility. I thank MTNN for going into this direction and assure you we will ensure the success of this offer because the success of the offer also represents the success of this market,” Amolegbe added.

Also, at the Investor Forum, Kasimu Garba Kurfi, Managing Director/CEO, APT Securities and Funds Limited said, “Today in the history of this market, we have never had an offer as low as 20 units – which is to encourage retail investors.”

“This we have never had in the history of the market. We want you (MTNN) to ensure that there is never issue of unclaimed dividend. Offer for sale is automatic qualification for dividend because we are buying from existing shareholders,” Kurfi said.

Boniface Okezie, National Coordinator, Progressive Shareholders Association (PSAN) said, “Today, having listened to the yearnings of Nigerians, I commend the Board and Management of MTNN.”

“For me, MTNN is still the best company to invest in. I urge all retail to buy this stock. For MTNN, this is time to work for shareholders not only for regulators. For investors, go and invest in MTNN and keep your dividends rolling in,” Okezie said.

Modupe Kadri, Chief Financial Officer (CFO), MTNN said the aim of the investor forum is “to introduce a wider base of Nigerian shareholders into the ownership of the MTNN”, adding that the Offer will also increase free float of MTNN on the Nigerian Exchange Limited (NGX). He noted that MTNN is the most actively traded stock on the NGX today.

Also speaking, Temi Popoola, Chief Executive Officer, Nigerian Exchange Limited said, “We have always been clear about the future of the market – retail investors, wealth creation and capturing the larger demography of the Nigerian population leveraging technology. I encourage you to encourage everybody to key into this MTNN offer – it’s a transaction that will revive the market”.

Bolaji Balogun, CEO of Chapel Hill Denham, an investment banking firm which is the Lead Issuing House and Bookrunner for the MTN Nigeria public offering said, “MTNN is Nigeria’s strongest company in terms of dividend distribution and dividend policy”.

“It is an increasing season of giving; if there is one gift you must give to a family member, if there is one share they would buy, it is MTNN,” Balogun noted, adding that sooner the business of MTNN will expand with the mobile banking license.

The five investment banks/issuing houses mandated to sell the offer are Chapel Hill Denham (the lead), Rand Merchant bank, Renaissance Capital, Vertiva, and Stanbic IBTC.

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