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MTN trading update

MTN released a really ugly looking trading statement yesterday after the market closed. Earnings are likely to be more than 20 percent lower for the full year to end 31 December 2015. HEPS in 2014 was 1536, it is likely that HEPS will be 307 cents lower than that. In other words, from 1229 cents per share or lower than that. Which means that at the TOP end of the range, the stock will trade (after the results on March the 3rd) on an earnings multiple of at least 12.5, possibly much higher if the earnings are likely to be much worse than that. And this excludes the pending Nigerian fine.

What does it look so bad? "The negative earnings performance has been impacted by a number of factors with the operational underperformance in Nigeria, resulting from the subscriber disconnections and the withholding of regulatory services, being a key contributor to this." How do you say, not good in Igbo and Hausa? Those of course are some of the regional languages spoken in Nigeria, bearing in mind that English is the official language.

We continue to evaluate the business, this may be a once off, wrestling with the regulator, or it may be part of an ongoing trend across the continent, governments under pressure to raise revenues looking at softer targets. The dividend will certainly matter here, there are undoubtably many institutions that hold the business for there cash flows. If the dividend is pruned back to the stem, you may see aggressive selling. Expect the stock to take some heat today.


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