MTN shares pop 10% on first-half results, fintech valuation

MTN shares jumped 10% in morning trading in Johannesburg on Monday after it reported “solid” interim results and said its fintech business had been valued at US$5.2-billion (R99-billion).

CEO Ralph Mupita said the group achieved a “solid performance in a challenging operating environment” in the first half of the year up to 30 June 2023.

Data traffic and fintech transaction volumes were up by 18.5% (35% excluding joint ventures) and 37.3%, respectively, enabled by ongoing investment in networks and platforms.

In the first half, the group deployed R17.2-billion in capex, for a capex intensity of 15.2% – within the medium-term target range of 15-18%.

The group delivered service revenue growth of 15.1%*, up slightly on a year ago and in line with medium-term guidance.

Ebitda, or earnings before interest, tax, depreciation and amortisation – a measure of operating performance – increased by 13.5%*, with an Ebitda margin of 44%* (first half of 2022: 44.5%*) as elevated inflation and foreign exchange rate depreciation continued to place upward pressure on costs. (*Reported in constant currency after accounting for pro forma adjustments.)

In particular, the business navigated the effects of Nigerian reforms, which placed an additional short-term burden on consumers and businesses.

Read: MTN fintech business valued at R99-billion as Mastercard eyes stake

“These impacts were partially mitigated through the ongoing progress of our expense-efficiency programme, which achieved sustainable cost savings of R702-million in the period,” MTN said.

‘Headroom’

Group net debt to Ebitda of 0.4 times as at 30 June 2023 (31 December 2022: 0.3x) remained within the group’s loans covenant limit of 2.5x. The holding company’s leverage increased to 1.5x (31 December 2022: 0.8x) due mainly to the rand’s depreciation against the dollar and the election of the scrip dividend options from MTN Nigeria and MTN Ghana for the 2022 dividend payments – which negatively affected the amount of cash “upstreamed” to the group.

“We maintained a positive liquidity position, with headroom of R40.9-billion as at 30 June 2023,” Mupita said.

Read: Inside MTN South Africa’s plan to win at mobile money

The group upstreamed cash totalling R4.2-billion from its operating companies in the reporting period. Over and above this, R1.4-billion of localisation proceeds were repatriated from MTN Nigeria (R1.2-billion) and MTN Ghana (R200-million) in the period.

Read: MTN spends big to escape load shedding hell

MTN and Mastercard, meanwhile, have signed a memorandum of understanding, which provides for a minority investment by Mastercard into MTN’s fintech based on a total enterprise valuation of about $5.2-billion on a cash- and debt-free basis.

“Signing of the definitive investment agreements is expected to occur in the very near term as finalisation of customary due diligence approaches,” MTN said.

MTN shares were trading 9.7% higher at R142.02 apiece at 10.05am. They touched an intraday high of R142.89 earlier in the session.  – © 2023 NewsCentral Media

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