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MTNN Grows Revenue By 16.6% As Cost Pressures Drive Margins Lower
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MTNN Grows Revenue By 16.6% As Cost Pressures Drive Margins Lower


By Cardinalstone  Research

MTN Nigeria Plc (MTNN: TP - N149.36; c.6.7% upside to market price) just announced a profit after tax of N49.4 billion (-0.7% YoY) in its published Q3’20 results. The flat Q3 numbers drove 9M’20 earnings to N144.2 billion (-3.3% YoY) and c.71.4% of our FY’20E forecast. 
 
Highlights
  • MTNN grew revenue by 16.6% YoY following a sustained surge in data revenue (+55.5% YoY) and recovery in voice revenue (+7.0% YoY) following setbacks from movement restrictions in Q2’20. Notably, mobile subscribers and active data users grew by 21.8% and 37.7% apiece to 75.0 million and 30.7 million, respectively. 
 
  • However, EBITDA margin contracted by 2.6 ppts YoY to 50.6% amid increasing operating costs. The cost pressures were driven inter-alia by the impact of naira depreciation on lease contracts and new investments on networks. 
 
  • Net finance costs rose by 22.7% YoY to N30.5 billion in the review quarter, weighed by higher interest expense on leases (+33.7% YoY) as well as lower interest income on amortized costs investments (-55.2% YoY). Management also attributed net finance cost pressures to an increase in borrowing. 
 
  • Over 9M’20, capital expenditures (including rights of use of assets) printed 26.1% higher YoY at N194.2 billion as the company deepened its mobile and data coverage across the country to accommodate increased traffic over the period. 
 
  • Net cash balance stood at N238.7 billion at the end of 9M’20, bolstered by a surge in net operating cash flow (224.1% YoY) to N228.6 billion. The impressive year-on-year cash improvement reflected improved working capital management and higher non-cash charges.
 
  • In the last quarter of the financial year, the knock-on effect of naira depreciation and illiquidity are likely to leave cost mostly higher. Yet, the sustained expansions in coverage, rural connectivity, and subscriber base could see the company reach our full-year PAT forecast of N201.2 billion. 

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