March 18, 2025/Cordros Report
In this note, we update our views on MTNN for 2025E following the publication of its 2024FY financials. Coming off the back of quite a tumultuous year, we anticipate a full recovery and a return to profitability and, subsequently, a restoration to a positive equity balance. Our view is predicated on (1) the 50.0% mobile tariff increase approved for mobile network operators (MNOs), (2) the renegotiated tower lease agreements with IHS amid other cost optimisation measures, and (3) an improving macroeconomic backdrop. Thus, we revise our 12M target price upwards by 24.5% to NGN337.69/s (Previously: NGN271.19/s) and maintain our “BUY” recommendation. Specifically, our valuation reflects an improvement in EBITDA margin (+857bps y/y to 47.9%) and lower currency losses (-74.5% y/y to NGN235.93 billion) on the back of the aforementioned factors. We project an upside potential of 37.8% on the current market price. Pertinently, we reiterate that exchange rate risk remains a key threat to our estimates in the medium term, especially as the structural issues that impede naira stability still exist. On our estimates, MTNN is trading on a 2025E P/E and EV/EBITDA of 7.1x and 3.4x, respectively.
Margin recovery expected: For 2025E, we estimate a c.40.0% y/y increase in MTNN’s ARPU to NGN4,510.80, highlighting the anticipated impact of the increase in mobile tariffs. Also, we forecast a gradual uptick in MTNN’s mobile subscriber base, growing by 1.4% y/y to 82.02 million by year-end (2024 year-end: 80.90 million). On this basis, we model a service revenue growth of 41.0% y/y in 2025E and an average of 11.6% in 2026 – 2029E. Referencing current consumption patterns, we forecast a sustained increase in data revenue, supported by sustained investments in data network coverage and capacity. We expect data revenue to grow by 40.2% y/y, contributing 47.1% of total service revenue. On voice (34.0% of revenue), we project a 46.1% y/y growth, with most of the support coming from the increase in mobile tariffs. We project EBITDA margin to settle higher at 47.9% (+857bps y/y), reflecting faster revenue growth amid lower cost pressures following the more favourable terms of the renegotiated IHS tower lease agreements and a better macroeconomic backdrop. Consequently, we forecast a return to profitability with an EPS of NGN34.38 (2024FY loss per share: NGN19.10), reflecting our expectation of a reduction in currency volatility, as we project net FX losses of NGN235.93 billion in 2025E (2024FY: NGN925.36 billion).
Dividends to resume in 2025E: We forecast PAT of NGN720.80 billion, which is expected to bolster MTNN’s balance sheet, resulting in a positive equity balance of NGN262.80 billion and retained earnings of NGN113.34 billion. Consequently, we hold the view that a resumption of dividend payments is likely for 2025FY, as opposed to our previous expectation of a resumption in 2026FY. This will be spurred by the strengthened financial position, which we believe will provide the flexibility to prioritise shareholder returns. We project 2025E DPS of NGN17.19, translating to a yield of 7.0% on current price.
Valuation: Our year-end target price is NGN337.69/s, derived from a 70/30 blend of DCF and sector-relative valuation estimates. Our DCF FV is derived from an equal blend of FCFF (NGN362.31/s) and FCFE (NGN234.22/s) estimates, assuming a 21.7% WACC and 4.0% terminal growth rate. We utilised the P/E (NGN449.47/s) and EV/EBITDA (NGN409.92/s) multiples for our multiple-based FV and derived a fair value of NGN429.69/s based on Bloomberg’s Middle East and African peer average (P/E: 13.1x | EV/EBITDA: 4.9x).
