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MTN Nigeria Fair Value Seen at N273/Share by Meristem for 44% Upside

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Investment firm Meristem has put the fair value of MTN Nigeria (MTNN) shares at N273.62, a 44 percent upside from current levels, in a note released to clients yesterday.

“In arriving at a fair value (of NGN273.62) for MTNN, we adopted a blend of Free Cash Flow to Firm and Dividend Discount Models,” Meristem said.

“Our valuation was guided by the overall positive outlook of the firm as well as the risk factors facing the company. All key business areas show great potential especially in view of the Ambition 2025 strategic plan.”

Meristem is bullish about growth in Data for MTNN (due to the firm’s 4G technology investments) and the Fintech (driven by the limited traditional banking footprint and recently granted PSB license) segments.

MTNN recently launched its Ambition 2025 strategy aimed at driving growth across key business segments including data services, fintech and digital services.

To this end the company has focused on enhancing its network capacity to grow data traffic via expanding 4G network coverage across Nigeria.

As at 9M:2021, the company had achieved 4G network coverage of 69.20 percent. MTNN has the highest 4G subscriber base in the industry given the relative size of its network.

The firm’s efforts in driving growth in its data services led to a 58.20 percent YoY increase in its average Mega Bytes (MB) Per User and ultimately an 85.50 percent YoY increase data traffic.

“The firm has also continued the expansion of its fintech business. The low traditional banking footprint, large cash economy and high unbanked population presents an opportunity for the firm’s fintech service to support the government financial inclusion drive,” Meristem said.

Since MTNN was granted a super-agent license in July 2019, the firm has scaled up its fintech segment to contribute 4.17 percent of revenue as at 9M:2021 (vs 2.90% as at H1:2019).

The recent receipt of regulatory approval-in-principle of a payment service bank license is expected to further enhance future fintech revenue.

MTN Nigeria which is listed on the Nigeria Exchange Group (NGX) currently trades at around N189 per share, for a market capitalization of N3.86 trillion and forward price to earnings ratio of 13.75x. It posted a 9-Month EBITDA growth of 27.4 percent to N634.5 billion.

MTN is forecast to pay N11.87 dividend per share in 2021, which is expected to rise to N13.91 in Full Year (FY) 2023.

“Downside risks to its forecast are however expected to emanate from stringent (and potentially restrictive) regulatory environment and significant exposure to foreign exchange volatility,” Meristem said.

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