We hosted a small group zoom call with the IHS CFO, Steve Howden, and Head of IR, Colby Synesael yesterday. The company has had a torrid time over the last 2 years, but operationally has proven relatively resilient to intense pressure in our view. Our takeaway from the call was cautiously positive, though of course lots depends on Nigerian Macro.
IHS Towers has reported another solid top line performance on an underlying basis and KPIs were good. As expected, headline trends have materially slowed given Q3 is the first quarter fully impacted by the NGN devaluation. Guidance has been maintained but the company highlighted that EBITDA is now expected to be towards the lower end of the range.
IHS Towers has reported a good set of results on an underlying basis with both revenue and EBITDA trends accelerating and announced a modest share buyback program. We continue to think that the long-term fundamentals for IHS remain strong and remain Buyers.
Amongst our EM Tower coverage, African TowerCos continue to outperform. At this stage, we prefer IHS as it offers the best EBITDA growth profile, coupled with its Project Green and considering that diesel prices in Nigeria are falling, we should see meaningful pull through for the year, despite the recent devaluation of the Naira.
IHS Towers has reported a strong set of Q4 results. Organic top line and EBITDA trends remained strong in Q4, as a result the company has exceeded its FY22 targets. The company has also provided a very encouraging guidance for FY23 we think.
2022 was a tougher year than we expected for African Telcos & Towers. While fundamentals remained generally good, the war in Ukraine and its impact especially on fuel prices as well as other macro pressures created some strong headwinds. While some of these are perhaps inflecting, we think in many ways 2023 will remain a tough environment, with headwinds in South Africa and the Nigerian election.
Q3 was a decent quarter overall for EM Tower companies. In Indonesia, headline growth slowed due to TBIG’s 2012 contract expiration but was otherwise healthy on an organic basis, up mid-single digits. There was a small slowdown in top line trends for Indus and China Tower, but performance was broadly in line with our expectations.
We show in this short note our new forecasts for IHS Towers after integrating Project Green and revising forecasts following the upgraded guidance post Q3 results. Our thesis and price target remain unchanged. We also show in this note how IHS compares with the other EM telcos of our universe from a growth and valuation standpoint, which highlights that IHS shares are undervalued currently.
We had an encouraging call last week with IHS. IHS’ top line is proving resilient to macro headwinds, although diesel cost remains a challenge. Importantly, we sense that at current share price levels the companies’ attitude to share buybacks is shifting, although timing on this remains uncertain.
Tower companies fared decently on the topline but saw pressure on their EBITDA margin in Q1. Indus Towers had a stable quarter; Indonesian towers’ growth continued to supported by acquisitions while China Tower rebounded from its weaker Q4 (due to one-off discounts).
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