By United Capital Research
Some days ago, MTN Nigeria Plc published its FY-18 financial report, indicating that revenue grew by 17.1 percent year-on-year to N1.0 trillion while profit after tax surged 79.7 percent year-on-year to N145.7 billion.
This spurred buying interest on the stock in the last two trading days.
Also, the telco paid N50.0 billion and N111.6 billion as dividends in 2017 and 2018, translating to a dividend per share (DPS) of N2.5 and N5.5 at a payout ratio of c.70 percent over the period.
In Q1-2019, MTN Nigeria reported a revenue growth 13.2 percent year-on-year to N282.1 billion. If annualized, this translates to N1.13 trillion by FY-2019.
As such, EPS and BVPS numbers both seem likely to settle at c.N9.5 per share.
At a dividend payout of 80 percent (compared to 70 percent average in 2017 and 2018), we estimate DPS at c. N7.6 which implies a dividend yield of 5.7 percent.
Again, ROE was 87.7 percent in 2018, which is consistent with expected ROE of +90 percent for 2019.
In terms of valuation, we look at the Enterprise Value to EBITDA (EV/EBI TDA) multiple for MTN Nigeria, this came to 6.3x, below 6.9x average for peers across the Middle East and African Markets. The implied fair price using EV/EBITDA model came to N145.
However, by Price to Earnings multiples (P/E), MTN Nigeria has a PE of 13.9x compared to 20.4x for peers, implying a fair price of N194.50k per share.
Overall, our blended valuation model sees MTN Nigeria at N171.70k per share, indicating that MTN Nigeria is underpriced at current price with a 25.7 percent upside potential.
