Airtel signs $125m sustainability-linked facility with Citi
…share price up 99.5% year-to-date …we maintain our Sell recommendation, says Coronation Research
Airtel Africa Plc has announced the signing of a $125million revolving credit facility with Citi through its branch offices/subsidiaries in sub-Saharan Africa.
This facility, according to Airtel Africa is in line with its strategy to raise debt in its local operating companies and “will include both local currency and US dollar denominated debt.”
The facility further strengthens Airtel Africa’s commitment to transforming lives across the communities in which it operates.
“The facility has a tenor up to September 2024 and will be used to support Airtel Africa’s operations and investments in four of its subsidiaries. The facility provides potential interest rate savings in exchange for achieving social impact milestones relating to digital inclusion and gender diversity, with a focus on rural areas and women, and aligning with the Group’s sustainability strategy launched in October 2021”, Airtel Africa said.
The N1,905.40 per share Airtel Africa traded on the Nigerian Exchange Limited (NGX) represents positive return of 99.5percent year-to-date (YtD). The telco’s current share price represents a 52-week high as against a record 52-week low of N715 per share.
“On the NGX, the stock continues to trade at valuations that we find unjustifiably rich. Moreover, it has become more expensive since our last note. On our estimates, the stock is trading on forward P/E and EV/EBITDA multiples of 25.0x and 8.3x, a rich premium to emerging market peer multiples of 13.7x and 5.6x. Furthermore, in London, it trades at a Forward P/E of 10.8x,” according to Ope Ani, senior analyst at Coronation Research in their July 28 commentary titled “Q1 23 earnings in line, valuation premium widens”.
“We think the primary reasons for the mispricing are majorly around Nigeria’s FX liquidity conundrum and the stock’s low liquidity compared with its market capitalisation. In our view, a much-improved FX liquidity could take the steam out of the rally. Accordingly, we maintain our SELL recommendation on the stock,” the Coronation Research analyst said, while adding that their price target for the telco’s stock is N1,051.07, which implies potential downside of -44.8percent.
The Airtel Africa’s sustainability strategy was one of the most important steps the telco had ever taken. Since its launch last year, the business has been focused on identifying the risks and opportunities that moving to a more sustainable future will bring, and developing the programmes and long-term goals that will guide the group.
Its sustainability strategy has four focused pillars – each with specific and measurable goals or commitments. It was designed to reduce as well as mitigate Airtel Africa’s impact on the environment and to support communities through digital access.