Avior Capital Markets - MTN Group Limited (10CM) MTN | The Nigerian discount

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Avior Capital Markets

Ruhan Du Plessis

MTN | The Nigerian discount

MTN and the Nigerian government reached an agreement regarding the central bank's allegations that MTN illegally repatriated USD8.1bn of dividends, with MTN settling the matter for USD53m. Despite the resolution, we expect MTN's Nigerian operations to trade at a discount to our pre-dispute valuation as increased regulatory risk has increased the cost of capital. Nonetheless, the resolution and expected recommencement of dividend repatriations from Nigeria improves the Group's cash flow visibility.

Accordingly, we increase our valuation for MTN Nigeria to ZAR34.5ps from ZAR20.5ps previously, implying an increase in our forward EV/EBITDA multiple to 5.8x from 3.7x. Our pre-dispute valuation of 8x for Nigeria highlights upside to our valuation should the remaining tax claim be resolved, and regulatory visibility improve. The performance of the Nigerian economy influences the Group. Thus, the 37% decline in oil prices since Oct'18 will negatively affect the Group.

24/01/2019 8 EN

Underlying

MTN Group Limited

MTN Group is a holding company engaged in the investment in the telecommunications industry offering voice services via 2G and 3G networks, including prepaid and postpaid airtime, please-call-me message service, international roaming, electronic voucher distribution services and community payphones, mobile and fixed data products, including short message service (SMS), multimedia message services, internet access, MTN MobileMoney, content portal MTN Play, Google SMS information services, USSD services and corporate data services. Co.'s operations are divided into the following three regions: South and East Africa, West and Central Africa, and the Middle East and North Africa.

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ZAE000042164 Johannesburg Stock Exchange South Africa

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Avior Capital Markets

Avior is a globally recognised capital markets research and trading firm, with the broadest research coverage within the region, with 100+ SA and 20+ SSA companies under coverage. Avior services clients from offices in London, Cape Town and Johannesburg.

Our research quality is consistently recognised in local and global surveys, with 18 analysts currently rated in their respective sectors (FM 2017). Value add through in-depth, innovative, high quality and consistent research with comprehensive underlying fundamental modelling supported by regular analyst and roadshow interactions.

Avior has proven that by working closely with our clients we can mutually develop dominant positions in certain sectors, going from strength to strength. Avior has a dedicated ESG team, having been ranked #1 in Corporate Governance research since 2008.

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Analysts

Ruhan Du Plessis

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MTN | The Nigerian discount

MTN (Buy, TP: ZAR130, +13%) Q4 24: Solid quarter, FY24 dividend up

MTN (Buy, TP: ZAR130, +62%) Feedback from small group call

MTN (Buy, TP: ZAR130, +45%) Q1 24: Slow start to the year; decent top line in SA

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SA Investment Strategy | Review of January 2020 for SA investors: Coronavirus weighs on the ZAR

SA Banks | Low credit risk in commercial property | Time to buy SA banks

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