March 05, 2020 / 09:33 AM / By FBNQuest Research / Header Image
Limited changes to our earnings forecasts and price target
We maintain our Outperform rating on MTN Nigeria (MTNN) following its Q4 2019 results which were broadly in line with our expectations. Our 2020-21E EPS forecasts and price target of N201.0 are also unchanged. In contrast to Q3 2019 when subscriber growth disappointed, MTNN recorded net subscriber additions of 2.7 million during the quarter (vs. 0.1 million Q3). Active data subscribers also increased by 13% q/q or c.2.9 million subscribers to 25.2 million compared with net additions of 1.6 million (+8% q/q) in Q3 2019. 4G population coverage expanded to c.43% from c.35% in Q3 2019.
Going forward, management continues to see huge opportunities for data growth, particularly in the 4G segment which accounts for less than 50% of active data subscribers. Consequently, it has guided to a total capex spend of c.N600bn over the next three years (2020 - c.N218bn ex-right of use assets) to support expansion of its 4G footprint. It has a target of c.60% by end 2020E. Revenue for the voice segment, though down to single-digits in 2019 - from the teens range in 2018 - is expected to continue to grow on the back of supportive demographic trends, mainly new unique subscribers which account for c.30-50% of the company's net additions.
Moving into 2020E, we forecast revenue growth of 10% y/y to N1.3trn, mainly driven by data revenue growth of 30% y/y. Our growth forecast for voice revenue is modest at 5% y/y. On the back of the y/y topline growth, we forecast PBT growth of 14% y/y. Apart from the strong outlook for data revenue growth, a favorable response to mobile money in Nigeria could be a potential catalyst for revenue growth going forward.
Q4 PBT up 55% y/y, driven by double digit y/y growth in data revs
MTNN's Q4 revenues were up by 14% y/y, primarily driven by data revenue which grew by c.63% y/y. Voice revenue growth was modest at c.4% y/y. On a full-year basis, voice and data revenue grew by 8% y/y and 43% y/y respectively in 2019.
Further down the P&L, PBT advanced by 55% y/y, thanks to a combination of factors, including solid topline growth y/y and a -18% y/y reduction in direct network and transmission costs, and the absence of regulatory fines. PAT also advanced by 77% y/y because of an -800bp y/y reduction in the effective tax rate to 31.1%. Sequentially, revenue, PBT and PAT were up by 8%, 11% and 9% q/q respectively. Relative to our forecasts, sales and PBT were broadly in-line. However, PAT came in slightly ahead of our forecast.