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MTN share price fell to N122 on Friday  the lowest since May 21, 2019, two days after its famed listing. Its allure seems to have waned since it hit its peak of N159 per share earlier in the year when it newly listed. In the stock market, a lot can change in a year, not to talk of 6 months. But when stocks fall, it’s a signal for whether to buy or sell.  

Nigeria’s largest mobile telecommunication firm released its 2019 9 months result showing that revenues rose 12% year on year to N856.4 billion. Pre-tax profits also rose from 28.9% to N148.3 billion, delivering an astonishing return on equity of 164%.  

While you salivate on that, the company also generated an impressive gross operating cash flow of N439 billion, or the more investor preferred EBITDA of N460 billion. Earnings per share printed N7.29 up 29% year on year and now double the N3.57 it printed in the entire 2018.  

Enough of the platitudes, after all its share price still fell. Why are investors hesitant to value MTN shares higher despite its profitable growth and cash minting abilities? One may have to look towards its EBITDA multiple to understand why. At a current EBIDTA of N460. 1 billion (N613 billion annualized) and enterprise value of N3.263 trillion, MTN EBITDA/Market Value multiple is at an impressive 5.3x. This multiple has already breached the 5.4x ascribed to its African and emerging market peers and could perhaps be why the share price is not rallying as much as expected. 

MTN’s EBITDA multiple Calculation – Nairametrics Research 

 MTN’s apparent illiquidity is also a major snag. The stock trades 30-day average volume traded is about 1.9 million, keeping it out of the reach of not just retail investors but institutional investors. Still significant in value considering its share price, but some banks trade billions daily in value. Foreign investors will have to scramble for the shares even if they found it very attractive; an uncanny proposition when you have cheaper liquid stocks with a higher propensity to deliver capital gains.  

But is there an upside? If you assume that MTN is on track to deliver an earnings per share of at least N10, then investors with an affinity towards dividends and long-term fundamentals may find the stock a worthy investment. MTN earnings per share of N7.26 annualized assumes a price to earnings multiple of 12.5x at the current price of N122. Still pricey when you compare to GTB and Zenith and 4.62x and 2.69x respectively. MTN’s dividend yield is also a paltry 2.39% and annualized earnings yield (the actual return on equity for new investors) just 8%.  

Either way, it appears that MTN has got limited upsides for a retail investorexcept you wish to hold for the long term. But you never knowespecially in this stock market where demand and supply seldom obey common sense. Should you decide to buy, be aware of the potential of this stock to deliver on results consistently on the short to medium term. Its market moat cannot be overemphasized. However, beware of its obvious pitfalls, particularly with delivering quick astronomical capital gains.  


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