A Fool’s Guide to the MTN Nigeria’s 2019 Public Listing


Thursday, May 16, 2019   /  01:30PM  / By TheAnalyst /Header Image Credit: @nsenigeria


With investor excitement igniting raw passion for shares in Nigeria’s Telecommunication (Telco) giant, MTN Nigeria Plc, the stage has been set for a spike in the Telco’s share price as it formally listed its shares on the Nigeria Stock Exchange (NSE) by way of introduction, today.


This means that the company has listed 20.4bn units of ordinary shares of its existing shareholders on the local Exchange with no fresh issue of shares available for public purchase as would have been the case if the company had done an Initial Public Offering or IPO.


Understanding Listing By Way of Introduction and By IPO

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A few basic questions can be asked about the new MTN market listing:


Question: Does the New Listing Mean that MTN Has Raised Fresh Capital From the Market?


Answer: The new listing does not raise fresh money for the company as would have been the case if it had listed on the NSE by way of an Initial Public Offer (IPO). The shares currently listed on the Exchange can only be sold by the company’s existing shareholders.


Question: Can the public buy shares from existing shareholders of MTN?


Answer: Yes, with the listing of MTN Shares on the NSE the general public can now buy such shares at a market determined price from the Secondary Market (i.e. on the floor of the stock exchange though a registered stockbroker(s) or via an online portal), provided the existing shareholders wish to sell.


Question: Can my Stock Broker buy the shares of MTN on my behalf?


Answer:  Yes, Stock Brokers can sell and buy shares of MTN on the NSE but this may not be immediate. Hitherto, the company’s shares had been trading in a private auction amongst holders of the company’s equity; the transactions were coordinated by the company’s secretary who managed the list of beneficial share owners.


With the new listing, MTN’s Board of Directors must make known its registrar and perhaps appoint market makers (these are stock brokers that guarantee a two-way price quote for buying and selling of MTN shares, while also ensuring that the market for trading in the stock is liquid). Existing shareholders in MTN will have to move their shares to trading accounts of their preferred stock brokers who will register them with the share repository managed by the Central Securities Clearing System (CSCS). 


Question: Can I buy MTN Stock now at the initial listed price?


Answer: This is very unlikely. Existing shareholders are probably going to want to ride the pent up demand curve and sell each existing unit at a price higher than the initial listing price of N90 per share.  Indeed analysts have already started crunching financial numbers and are coming up with estimates of hidden value potential of the stock.


For example, Coronation Merchant Bank analysts already forecast free cash flow (a measure of cash the company can easily deploy to enhance shareholder return) to grow at 9.2% between the estimated numbers for 2018 and the forecast numbers for 2022. The firm’s analysts believe that using a discounted cash flow model (DCF) the Telco should be presently trading at N110.1 per share. But taking a discounted target price analysts see the stock settling at N108 per share giving an upside potential on listed price of 20.7%. Buying above this might lead to a subsequent market correction that eliminates the hidden value premium. Some analysts have advised that new buyers of the shares of the company should wait until a future IPO before buying, this may be wrong advice.


Pent up demand will always drive MTN’s price above its listing value and excess demand over equities in open market supply will drive prices up for a while. Besides, the limited traded quantities that may occur before the proposed IPO will form part of the price determination mechanism of the new shares to be issued as the company would want to raise sufficient cash to cover its corporate expansion aspirations. What is important is that investors do not buy the stock at prices that represent a large premium over its DCF value.


Question: When will An IPO Be offered To Potential Subscribers?


Answer: At the moment, nobody outside MTN’s Board of Directors can say when an IPO will come to the market for public subscription. A lot will depend on the company’s growth plans, its current finance mix and its perspective on using expensive equity relative to cheaper debt to finance growth. The company would likely want to see how FY 2019 Results pan out, before thinking of raising new capital by way of an IPO.


A Fool’s Look At MTN in Q1 2019



  • Quarterly revenues have grown steadily over the last 2 years with total revenue rising from N249bn in Q1 2018 to N282bn in Q1 2019, representing a rise of +13.3% Y-o-Y. Given that call charges have remained constant over the period, the rise can be attributed to an increase in talk and data usage or what amounts to a rise in the average revenue per user (ARPU).




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Source: MTN Q1 Conference Call Presentation

The Telco giant was able to increase operating income, Q-o-Q from N123bn in Q4 2018 to N150bn in Q1 2019, a rise of about +22%. But on a Y-o-Y basis EBITDA hopped from N104bn in Q1 2018 to N150bn in Q1 2019, representing a growth of +44.2%.

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Source: MTN Q1 Conference Call Presentation

Quarterly CAPEX expenditure of the group has been on a forward flight until Q1 2019 when the company appears to have cut back spending, leaving a larger amount of cash on the table for investors. CAPEX rose from N18bn in Q1 2018 to N63bn in Q1 2019, representing an upward bubble of +250% Y-o-Y. But Q-o-Q, MTN controlled the glide in capital costs by bring CAPEX down by -14% from N74bn in Q4 2018 to N63bn in Q1 2019. This could mean that the company is slowing down expansion (unlikely) or is teasing investors with higher cash dividends before listing on the Nigerian Stock Exchange (NSE), a quite plausible explanation.

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Source: MTN Q1 Conference Call Presentation


  • Usually investors gloat over a company’s rising free cash flow (FCF), because the larger the cash flow the better the investor’s return. Higher discounted free cash flows mean higher intrinsic values of shareholder equity. Y-o-Y MTN’s adjusted free cash flow has risen from N47bn in Q1 2018 to N87bn in Q1 2019, reflecting a growth of +85.1%. Q-o-Q free cash flow has been bolder in growth, rising from N38bn in Q4 2018 to N87bn in Q1 2019, representing a quarterly leap of +129%.

  • The company’s major source of revenue in Nigeria comes from voice services; this is increasingly becoming an anomaly as global trends in Telco revenues indicate that the largest growth area for telephony businesses is digital data services. MTN still makes over 75% of its revenue in the local market from Voice services while Data services accounts for a relatively small 14.9%, although data as a proportion of revenue has steadily increased from 7.3% in 2016 to 12.2% in 2017 and 14.9% in 2018. This means that the company still has significant headroom to grow data services as a proportion of total revenue.


Table 1 Breakdown of MTN Revenue by % Contribution 2016-2018

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Source: MTN Q1 Conference Call Presentation



MTN Listings: A fool’s Historical Detour


MTN’s current listing of 20.4bn units of ordinary shares of its existing shareholders is one of the largest in the Nigerian Stock Exchange’s history and is the second largest by value (after Dangote Cement) in the last 10 years.


Table 2: Nigeria’s largest Stock Exchange (NSE) Listings Over the Past 10 Years

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Source: NSE Listing Announcements and other public data

For Further Clarifications, kindly contact research@proshareng.com or call 0700PROSHARE



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Disclaimer: The contents of this representation do NOT constitute a recommendation to buy or sell stocks but merely provides information for forward guidance of investors. Proshare Nigeria does not take responsibility for actions taken based on reading the contents of this analysis. To receive professional advice on the purchase or sale of stocks listed on any local Exchange investors are advised to meet with their legally registered financial advisers, stock brokers, accountants or lawyers. 

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