HSBC, one of the biggest financial services organisation in the world, says Zainab Ahmed, Nigeria’s finance minister’s comments are encouraging for the growth and valuation of MTN Group.
In one of it investor advisory reports published in November, HSBC said the minister’s comment at the 24th Nigerian Economic Summit (NES24) is a positive development for the telco.
HSBC highlighted three positive developments, for which it advised investors to hold or buy MTN’s shares.
“We look at 3 key positive developments: (1) Nigerian Minister of Finance supportive comments on the USD8.1bn repatriation issue,” the bank’s global research arm said.
“(2) launch of Payment Service Banking (PSB) licences in Nigeria and (3) consortium USD1.25bn investment into Airtel Africa at 7.4x EV/EBITDA.”
Speaking at the summit in Abuja in October, the minister said the Central Bank of Nigeria sanctions on MTN were very damaging for Nigeria, adding that CBN and MTN are working to resolve the issues.
Factoring her comments into market realities for MTN, HSBC explained that the comments were “encouraging” for MTN.
“The Finance Minister of Nigeria, Zainab Ahmed made the following key points at the 24th Nigerian Economic Summit on 23 October, 2018 in relation to the CBN’s repatriation claim against MTN
“The Minister said CBN and MTN are working together to resolve the issue. She also indicated the CBN has now received the required information.
“She said there is a tendency for big businesses to take regulations and governments for granted. She also said that the issue damages investor sentiment.
“The Minister mentioned continuous discussions with the regulatory authorities to avoid such issues happening again.”
The bank said MTN’s share price is expected to hit 107 South African rands (ZAR), even if it stood at ZAR86.86 on October 31, 2018 — after the company’s Q3 results.
HSBC said a consortium that includes “major global telecoms player Singtel (STEL.SI, Buy, CMP SGD3.12, TP SGD4.25) has raised USD1.25bn equity investment into Airtel Africa indicates improved investor sentiment with respect to Africa mobile growth in general”.
It stated that the outcome of the 2019 general elections in Nigeria will also affect MTN’s valuation in 2019.
“There could be potential for further rerating after Nigeria elections in February 2018: (1) if investor sentiment towards Nigeria improves,” the report read.
“(2) if the scheduled IPO for MTN Nigeria is launched in Q1 2019 and drives higher local ownership in the asset and (3) there is any M&A with regard to MTN Nigeria involving strategic partners in Nigeria.”