What MTN’s public offer holds for retail investors

With MTN’s move to sell 90 percent of its public offer of 575 million shares in Nigeria to retail investors, the telco giant is allowing individual investors to have a stake in one of the country’s most profitable businesses at an attractive entry price.

The public offer is MTN’s way of broadening its local shareholder base, thus providing the opportunity for as many Nigerians as possible to become shareholders in MTN Nigeria and share in the growth and value which the business creates.

MTN’s journey in Nigeria began in 2001 with a core group of Nigerian investors who provided the seed funding and who have been partners over the years, watching the business grow and thrive.

In this 20th year of its operation in Nigeria, in recognition of the part, Nigerians have played in the success story of the company in the country, MTN is expanding its ownership structure and is inviting Nigerians in every part of the country to join in on the next phase of its journey.

Read also: Public Offer: MTN is no longer foreign, it is Nigerian – shareholders association

MTN Nigeria’s public offer, which is the first to be delivered digitally in Nigeria, is being sold to retail investors at N169 per share. The offer is the first from MTN since the 2019 listing on the Nigeria Exchange Limited (NGX) and the company seeks to take advantage of digital integration to ensure substantial participation from investors across Africa’s most populous nation.

The offer, which opened at 8:00 am on December 1, 2021, is expected to close at 5:00 pm on December 14, 2021, with a minimum subscription of 20 shares and lots of 20 shares thereafter. Subscribers are also offered one free share for every 20 shares they buy.

Going by the current market price of MTN Nigeria at about N175 per share, the N169 per share being offered to retail investors comes at a discount. MTN has made it possible for average Nigerians to own shares in MTN Nigeria with as low as N3,380, the price of 20 units of its shares at N169 per share. This is a rare opportunity that should not be missed.

Investment analysts have been stressing that the MTN public offer of 575 million shares is a “Good Buy” for investors seeking higher returns – in form of capital appreciation and dividend yield.

Research analysts at Coronation Asset Management believe MTN Nigeria’s offer represents excellent value for investors. At the offer price, they said the shares trade at a Price/Earnings (PE) ratio of 11.6x their forecast of 2021 Profits After Tax, and a PE of just 9.1x their forecasts of 2022 Profits After Tax. The historic dividend yield for the stock, according to Coronation, is 5.5 percent and is expected to increase.

Wale Okunrinboye, an investment banker, said MTN is a solid company that has grown astronomically since it started in 2001 and is dominating the telecom space.

“Its demand is inelastic as people always need to communicate and so the product will always be in demand. Also, you don’t have many players going into that space because the entry barriers are quite large,” Okunrinboye said during a Nairametrics Clubhouse show, ”On The Money” series.

“Also, in terms of growth prospect, asides from the increasing Nigerian population, there is also the increasing data consumption. Going forward, data consumption will increase even more as we go more digital. The revenue from data consumption continues to increase quarter after quarter,” he said.

The implication of the move by MTN to allow retail investors to own a share of its Nigerian stocks is positive not just for the shares of the telco giant but for the entire stock market, according to a poll of 10 market analysts.

According to these market analysts, the public offer will improve the liquidity of MTN shares on Nigerian Exchange Limited because it will be held by diverse investors. The capital market is also expected to benefit from the improved liquidity on the stock given it would be in the hands of many investors, thus aiding price discovery.

The liquidity of a market is one of the catalysts that attract foreign investors to an equities market like Nigeria’s – the ability to enter into the market and leave whenever they deem fit.

“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,” Temi Popoola, Chief Executive Officer, Nigerian Exchange Limited, said at the recent Investor Forum by MTN to provide insights into MTN Nigeria’s investment case, the public offer and business outlook.

“I encourage you to encourage everybody to key into this MTNN offer – it’s a transaction that will revive the market,” Popoola said.

As reflected in its massive CAPEX investment in the Nigerian franchise, MTN group is betting on Nigeria as one of its key markets, no wonder it was recently listed as a 2021 priority to “accelerate Nigeria’s growth”.

The company, which extended its chief operating officer Jens Schulte-Bockum’s contract by two years to 2024, said it was targeting 2021 capital expenditure of ZAR31.1 billion, up from a prior outlook of ZAR14.8 billion.

Having listed its Nigerian business in Lagos two years ago, MTN has become the second-largest stock by market capitalization on the Nigerian Exchange Limited.

MTN’s core profit jumped 24.1 percent in the three months to September on robust demand for data and digital financial services. It added 0.2 million subscribers during the quarter, taking the total to 271.9 million.

Nigeria is MTN’s most profitable market, generating 32 percent (R57.9 million) of revenues; MTN South Africa generates about 25 per cent (45.4 million) of revenues. Nigeria’s revenues for 2020 were up 14.6 percent.

The MTN Group also allocated 38 percent (12.64) of all CAPEX expenditure in FY 2020 to its Nigerian operations. Nigeria generates a humongous amount of cash for MTN Group, with cash generated at about 37 percent (ZAR17.23 billion), and also took on 37 percent (ZAR17.23 billion) of all reported Group debt.

MTN is in the process of a strategic remake, tagged the “Ambition 2025”, that will see it focus squarely on Africa. The company wants to be the leading digital solution provider to drive African progress by 2025. This strategy will see the telco pivot from a “product” to a “platform” player.

The company is expanding from traditional voice and data to digital via its Ayoba brand and FinTech via its MoMo brand.

The telco, with over 21,900 employees, was founded in South Africa in 1994. As of March 2021, MTN had 280 million subscribers in 21, including Nigeria.