Wednesday, December 02, 2021, 04:50PM / by Adaeze Nwachukwu,
Proshare Research / Header Image Credit: @MTNLoaded
In the wake of global corporate repositioning, MTN has decided to shake up the investor composition of its Nigerian operation by selling off an additional 575m units to local Nigerian investors. The move comes off the back of its listing on the Nigerian Exchange Limited (NGX) in 2019.
The recent offer for sale corrects the earlier situation and gives more Nigerians the opportunity to invest in the local telco market. The MTN offer helps broaden market instruments available to local investors and deepens the quantity of tradeable daily instruments. More tradeable equities in the country's largest network carrier will gradually help correct what some see as structural market problems in establishing the company's fair market value. The narrow float of MTN Nigeria has supported a notion of upwardly biased market values.
Floating on Shares
Investment analysts believe that the earlier absence of free float was mirrored by the two-week surge in the market price of the company's shares as 'outsiders' tried to prise limited quantities of shares from privileged 'insiders' when the shares were listed by introduction two years ago.
Of Share Structure and Pricing
The MTN Group holds 78.8% shareholding in MTN Nigeria and intends to sell-down a total of up to 14% shareholding in MTN Nigeria in the near to medium-term.
The Securities and Exchange Commission (SEC) has approved the offer for sale of up to 575m ordinary shares of MTN Nigeria. The bookbuild was offered to institutional investors and was one of the key factors in establishing the retail offer prices of N169.
The 575m units of shares was valued at N100.31bn (US$241.7m) which brought it to N169/unit of share.
With the company offer at N169 and the stock currently selling at N190 as of November 26, 2021, on the Nigerian Exchange (NGX), an immediate hidden value opportunity of +8.92% percent was realisable.
When the telecommunications company was listed by way of introduction two years ago, several Nigerians complained about the absence of market free float. In other words, few shares were available for public trading outside those held by existing pre-listing shareholders. The early absence of tradeable shares of the company raised the ire of stockbrokers whose clients had lined up a war chest of cash to invest in the telco giant.
According the Telco's Chief Executive Officer (CEO), Ralph Mupita, "This is the first step in a series of offers over the near to medium-term for MTN Group to sell-down a total of up to 14% shareholding in MTN Nigeria".
The seller of the shares is MTN International (Mauritius) Limited. The advisers to the Offer have noted that where there is an over-subscription, 15% of the total shares on offer or 86.25m shares, would be offered for further sale subject to the approval of the SEC.
Months in the Share life of a Telco
According to analysts the Telco giant's share price has not exactly mirrored the movement of the NGX All-Share Index (ASI), as year-to-date (YTD) growth of MTN gave a recent return of +4.97% against the +2.11% return of the ASI as of 26 November 2021.
MTN's share price has grown steadily month-on-month (M-on -M), except in March when it hit a rut and sold at N160 per share. The news of an offer for sale, sent positive messaging into the market leading to a sustained rise in the data carriers share price.
MTN Nigeria's market Beta at 0.89 is lower than 1, indicating that a one percent rise in the ASI would likely lead to a 0.89 per cent rise in the value of the stock (see chart 1 below).
Chart 1: Price Movement of MTN Nigeria & ASI
Source: NGX, Proshare Research
Equity analysts believe that the future of Nigeria's telecommunications sector is bright. The stock gazers premise their outlook on the prospective rollout of 5G services, the adoption and integration of fintech solutions on mobile consumer devices, the growth of payment service banks (PSB), and the higher head room for the telco to raise the ratio of its active internet subscribers to the country's population, friendlier Nigerian Communications Commission (NCC)regulations (see illustration 1 below)
Telecom companies must lock in their growth strategies to ensure they are not kicked out of the game. An overview of NCC's subscriber data discloses the narrowing gap between MTN and its nearest competitors- Airtel Africa and Glo. This is because brand loyalty currently hinges on excellent customer experience and satisfaction. Nevertheless, looking forward, the broad bet seems to be on MTN yielding superior investor returns.
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