MTN Nigeria Sits Out Rally as N4trn Divergence Emerges vs. Dangote Cement

MTN Nigeria used to compete shoulder to shoulder with Dangote Cement as Nigeria’s largest listed firm, just last year.

Today a N4 trillion market capitalization divergence has emerged between the 2-firms as Dangote Cement continues to hit new highs daily while MTN Nigeria has seemingly sidestepped the red-hot rally in Nigerian equities over the past 8-months, MoneyCentral’s analysis shows.

Dangote Cements’ N10.098 trillion market capitalization makes it Nigeria’s largest listed firm and this compares to N5.9 trillion for MTN Nigeria which has been pushed into 3^rd place behind Airtel Africa.

While Dangote Cements stock has gained 140% in the past 1-year, MTN Nigeria’s shares are up just 34% in the same time period. Year to date in 2024, Dangote Cement has nearly doubled with an 85.25% gain in its shares, while MTN Nigeria is up 9.85%. Nigerian stocks as a whole, measured by the broad NGX All Share Index are up 28% in 2024, meaning MTNN is underperforming the market.

Investors soured on MTN Nigeria after it reported a huge drop in third quarter (Q3) 2023 earnings and signaled that the negative impact from Nigeria’s currency devaluation may carry over into subsequent quarters.

MTN Nigeria Plc (MTNN) reported a 78.6% decline in its Q3, 2023 profit after tax (PAT) to N18.60 billion.

This earnings weakness reflected the addition of unrealised forex loss on outstanding matured trade obligations as of 30 September 2023 to the tune of N87.5 billion after the company re-measured all its trade lines to correctly exclude the naira-denominated cash cover that was provided to the banks.

MTNN also witnessed some cost pressures in the form of a 47.5% surge in operating expenses. This operating expense increase came about as a result of the impact of the forex harmonisation and rising inflation on the company’s tower contracts.

Nine months 2023 earnings per share or EPS for MTNN came in at N7.06 (-45.23% YoY) due to the FX loss-induced finance cost pressures witnessed YtD.

This earnings decline could portend a lower FY’23 dividend compared to last year’s dividend of N15.6/share.

Some analysts still see value in MTN shares despite the underperformance. Afrinvest has an accumulate rating on the stock with a target price of N338 per share.

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