February 1, 2023/Cordros Report
MTN Nigeria Communications Plc (MTNN) published its Q4-22 audited results yesterday, reporting a standalone PAT of NGN89.84 billion (Q4-21: NGN78.34 billion). Consequently, the EPS stood at NGN4.41 (+14.7% y/y), bringing the 2022FY EPS to NGN17.63 (+20.2% y/y), supported by the sturdy growth in revenue (+24.1% y/y). MTNN’s board declared a final dividend of NGN10.00/s in Q4-22 (2022FY: NGN15.60/s), equating to a dividend yield of 4.4% based on the closing price of NGN225.00/s as of 31 January 2023.
Service revenue grew by 23.8% y/y in Q4-22 (2022FY: +21.5% y/y), driven by the expansion across the voice (+10.2% y/y | 50.5% of revenue), data (+43.2% y/y | 38.6% of revenue) and value-added services (+16.9% y/y | 4.0% of revenue) business lines. The increase in the voice revenue during the period (2022FY: +4.1% y/y) was supported by the recovery from the NIN-SIM linkage directive, as the company revealed in its press release that reactivating more customers and ramping up gross connections aided the growth in voice revenue. The growth recorded in MTNN’s data revenue (2022FY: +48.0% y/y) resulted from the continued growth of active data users and increased data usage as data traffic grew by 66.6% y/y.
On the cost side, MTNN recorded higher network operating costs (+32.9% y/y) in Q4-22, triggered by the (1) higher dollar prices on lease rental cost, (2) accelerated gross connections, (3) FX challenges and (4) regulatory fees. Likewise, the elevated inflation in the environment drove the company to report a higher OPEX growth (+26.8% y/y) in Q4-22. Nevertheless, despite the higher costs incurred, EBITDA settled higher by 19.5% y/y to NGN289.80 billion in Q4-22. Meanwhile, the EBITDA margin declined by 203bps to 52.1% in Q4-22 (2022FY: +17bps to 53.2%).
Further in, the company reported a higher net finance cost (+34.6% y/y), following the faster increase in finance cost (+20.3% y/y) relative to finance income (+2.7% y/y). We attribute the increase in finance cost to the combined impact of the higher interest rate and higher foreign exchange losses during the period.
Overall, pre-tax profit grew by 15.6% y/y to NGN133.30 billion in Q4-22 (2022FY: +22.3% y/y to NGN533.97 billion). Profit after tax settled 14.7% y/y higher at NGN89.83 billion in Q4-22 (Q4-21: NGN78.34 billion).
The company will hold a conference call today at 3 pm Lagos time to discuss the results. Kindly click here to register.
Comment: MTNN’s 2022FY performance was impressive, though the overall earnings outturn underperformed relative to our expectations (2022E: +42.2% y/y), with the variance stemming from the significant cost pressures in the year. Consequently, we are concerned about the low EBITDA margin the firm recorded during the period. For 2023FY, we expect sustained growth in the telco’s overall revenue, driven by the firm’s continuous ramp-up of gross connections and implementation of NIN recovery initiatives, which we believe will be accretive to subscriber base growth. Also, we believe that reopening the NIBSS interface for outbound transfer will support MTNN’s fintech business. Our estimates are under review.