BY BUSAYO SAMUEL
The shares of MTNN have gained increased attention from investors over the past two weeks following the announcement that the Central Bank of Nigeria has granted Approval in Principle for license application regarding its proposed MOMO Payment Service Bank.
In addition, the company disclosed that the group company (MTN International) would embark on a public offer for the sale of up to 575 million shares via a book-building process to institutional investors and a fixed price to retail investors.
The confluence of both events has elicited strong buying interest in the stock as the share price hit N200.00 on November 9– the first time since the stock was listed by introduction in May 2019.
Since November 5, when both announcements were made, MTNN shares have gained 8.2 percent after closing at N190.00 (November 17, 2021).
Stock analysts said the long-term outlook on MTNN is positive, given its market leadership position, attractive industry dynamics and relatively less cyclicality.
“Based on our assessment of the likely impacts of the developments above, we believe the stocks’ re-rating is justified,” analysts at Cordros Research said.
Analysts acknowledged that the recent approval from the apex bank will enable MTNN to put in place the necessary infrastructure to offer banking services such as acceptance of deposits, remittances, payment processing and mobile wallets. “However, it is instructive to note that the AIP implies a six-month waiting period after which final approval will be given, provided all regulatory requirements are met. As things stand, it is difficult to reliably estimate the potential contribution of the PSB subsidiary to revenue, EBITDA and Free Cash Flow (FCF),” Analysts added.
Cordros Research highlights that its fintech business (an abridged version of the PSB subsidiary) contributed 4.2% to revenue as of 9M-21.
“Regulatory data from Kenya, Tanzania and Ghana suggest that the market leader in the voice market is also the market leader in the mobile money space. This is because the size of the subscriber base provides leverage for dominance. Accordingly, we believe this suggests that MTNN will likely dominate the mobile money space ahead of the final approval to launch (MTNN is the voice leader with a 38.6% market share as of September 2021, according to NCC data). With Airtel’s mobile money business contributing 11.4% to revenue (as of H1-21), we see scope for increased contribution from MTNN’s fintech business from the current level of 4.2%.”
The telecoms giant service revenue grew by 22.9% y/y in Q3-21 (9M-21: +23.6% y/y), due to the broad-based expansion across voice (+7.4% y/y; 57.6% of revenue), data (+57.2%y/y; 33.2% of revenue), and value-added services (+62.6% y/y; 4.5% of revenue). We expect continued growth in voice revenue in line with the recovery in economic activities, particularly in the informal sector.
Similarly, we expect the momentum in data revenue to be sustained by its enhanced network capacity and favourable country demographics amid rising smartphone penetration. Overall, we estimate service revenue will grow to NGN1.62 trillion (+20.4% y/y) in 2021E, supported by growth in voice (+9.8% y/y), data (+47.2% y/y) and value-added services (+27.4% y/y).
