Last week, MTN Nigeria PLC (MTNN) published its FY-18 financial report, indicating that revenue grew by 17.1%y/y to N1.0tn while Profit after tax surged 79.7%y/y to N145.7bn. This spurred buying interest on the stock in the last 2 trading days. Also, the Telco paid N50.0bn and N111.6bn as dividends in 2017 and 2018, translating to a Dividend per Share (DPS) of N2.5 and N5.5 at a payout ratio of c.70% over the period.
In Q1-2019, MTNN reported a Revenue growth 13.2%y/y to N282.1bn. If annualized, this translates to N1.13tn by FY-2019. As such, EPS and BVPS numbers both seem likely to settle at c.N9.5/share. At a dividend payout of 80% (compared to 70% average in 2017 and 2018), we estimate DPS at c. N7.6 which implies a dividend yield of 5.7%. Again, ROE was 87.7% in 2018, which is consistent with the expected ROE of +90% for 2019. In terms of valuation, we look at the Enterprise Value to EBITDA (EV/EBITDA) multiple for MTNN, this came to 6.3x, below 6.9x average for peers across the Middle East and African Markets. The implied fair price using EV/EBITDA model came to N145.
However, by Price to Earnings multiples (P/E), MTNN has a PE of 13.9x compared to 20.4x for peers, implying a fair price of N194.5/share. Overall, our blended valuation model sees MTNN at N171.7/share, indicating that MTNN is underpriced at the current price with a 25.7% upside potential.